FIIs poured as much as $8.4 billion into Indian equities in the third quarter and much of it into banking and financial sectors
Foreign Institutional Investors (FIIs) have been pumping money into the Indian stock market as if there is no tomorrow. According to Edelweiss, FII holdings in the BSE100 companies is estimated now at 19.7%, an all-time high after they poured in as much as $8.4 billion in the third quarter of the current fiscal (compared to $8.1 billion in the previous quarter). In fact, in the current quarter, FIIs have estimated to have already invested $7.1 billion, which is near the last quarter amount. Some of the top stocks held by FIIs are HDFC, NMDC, HDFC Bank while they sold Cairn India, DLF and United Phosphorus. FIIs are also bullish on the financial sector.
“We have extended the exercise to gauge which stocks have attracted highest buying or selling by FIIs. Banks remain a clear preference for FII buying. Four out of the top five FII buys are banks. Government divestment in NMDC also attracted good traction resulting in $472 million inflows into the stock. Cairn India was the top FII sell. The Robert Vadra scam resulted in FIIs selling $67 million from DLF,” the report said.
The BFSI segment which comprises of financial institutions and banks was lapped up the most by FIIs. As much as 41% of all the money invested in the third quarter went to this sector. As mentioned above, the top four out of five picks were financial institutions. Edelweiss said, “We do not have SEBI data for FII flows into various sectors for Q3FY13, but our estimates indicate that majority of FII flows were garnered by the banking sector, in continuation of the Q2FY13 trend.
Several reasons cited by Edelweiss are the theme that has been oft repeated by several other brokers: the government’s reforms push, the Reserve Bank of India (RBI) rate cuts as well as quantitative easing by central banks world over. This resulted in massive influx of so called “easy money” which found its way to India. However, if we compare the cumulative inflows in relative to other emerging economies, the findings are alarming. Is there a bubble brewing? Take a look at the graph below:
One of the more discerning aspects of FII inflows has been, according to Edelweiss, their focus on increasing ‘beta’ in their portfolio. In other words, their portfolio has just got riskier and more volatile, by investing more in BFSI (which is uncertain), autos (which is going through a hard time) and information technology (rupee-dollar uncertainty continues). The report said, “What’s more interesting is the increase in beta of FII portfolios, with utilities and autos gaining traction. As a result, the relative positioning of BFSI, autos, utilities, capital goods and materials increased during the quarter. This was funded by reduction in relative positioning in consumers and IT.” Beta refers to the individual stock movement in relation to the market. The higher beta stocks are more volatile, implying that quick money could be made on short spurts in momentum, and vice versa.
Their addition of ‘beta’ to their portfolio meant that they were overweight on banks & financial institutions, information technology and auto, while remaining underweight capital goods, energy and consumer goods. If we look closely, this seems to be more of a directional bet, based on recent actions of the government, than a bet on India’s long-term growth story.
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If the Nifty is able to rally from this level, it may head for 5,960
The market continued its losing streak into the new week on lack of cues from Asia and on concerns about the nation’s economic growth. However, if the Nifty is able to rally from this level, it may head for 5,960. The National Stock Exchange (NSE) reported a volume of 51.46 crore shares and advance-decline ratio of 622:897.
The market opened with minor gains on cautiousness ahead of the release of key macro-economic indicators this week. In global trade, most markets across are shut for the Chinese Lunar New Year holiday, and that which was open was up. The US markets witnessed a strong close on Friday on positive economic indicators.
The Nifty opened 16 points higher at 5,920 and the Sensex started off at 19,518, a rise of 33 points over its previous close. Early gains helped the market hit its intraday high, wherein the Nifty touched 5,924 and the Sensex went up to 19,543.
However, the gains were short-lived as profit booking soon saw the benchmarks trending down. The market was range-bound with the key indicators hovering on both sides of their previous closing levels in subsequent trade.
Meanwhile, MCX Stock Exchange’s (MCX-SX) benchmark index SX40 went live with its equity trading platform on both the equities and equity derivatives today. MCX-SX became India’s third full-fledged equity bourse after the BSE and the NSE.
The market dipped to its lows shortly after 11.00am with the Nifty falling to 5,879 and the Sensex moving back to 19,417. Buying in select sectors in non trade lifted the benchmarks into the green, lack of cues from its Asian peers kept a cap on the gains.
Adding to the economic fears, Reserve Bank of India governor Duvvuri Subbarao today cautioned the country was headed for the highest ever current account deficit (CAD) this fiscal, after it rose to 5.3% of GDP in the second quarter. He also expressed concern over the way the CAD, which is the gap between forex gained and forex spent, is being financed by volatile inflows instead of more foreign direct investments.
Lacklustre trade continued in the late session as the benchmarks once again gave up their gains. The market witnessed another of subdued trade with the Nifty closing six points (0.10%) down at 5,898 and the Sensex falling 24 points (0.12%) to 19,461.
Among the broader indices, the BSE Mid-cap index fell 0.18% and the BSE Small-cap index declined 0.31%.
The top sectoral gainers were BSE Realty (up 0.91%); BSE Healthcare (up 0.74%); BSE PSU (up 0.47%); BSE Bankex (up 0.34%) and BSE Power (up 0.29%). The main losers were BSE Capital Goods (down 0.81%); BSE TECk (down 0.43%); BSE IT (down 0.33%); BSE Fast Moving Consumer Goods (down 0.31%) and BSE Oil & Gas (down 0.18%).
Thirteen of the 30 stocks on the Sensex closed in the positive. The chief gainers were Cipla (up 3.62%); Dr Reddy’s Laboratories (up 2.45%); Hindalco Industries (up 2.14%); Sterlite Industries (up 2.07%) and Hindustan Unilever (up 1.88%). The major losers were Maruti Suzuki (down 1.64%); ONGC (down 1.61%); Jindal Steel & Power (down 1.60%); Bharti Airtel (down 1.57%) and HDC (down 1.27%).
The top two A Group gainers on the BSE were—MMTC (up 18.96%) and Hindustan Copper (up 10.48%);
The top two A Group losers on the BSE were—Cadila Healthcare (down 6.43%) and AstraZeneca Pharma India (down 6.36%).
The top two B Group gainers on the BSE were—State Trading Corporation (up 19.98%) and Panama Petrochem (up 17.37%).
The top two B Group losers on the BSE were—Cochin Minerals & Rutile (down 19.98%) and Crest Animation Studios (down 19.98%).
Out of the 50 stocks listed on the Nifty, 23 stocks settled in the positive. The major gainers were Cipla (up 3.66%); Axis Bank (up 3.04%); Hindalco Ind (up 2.60%); Tata Motors (up 2.40%) and Dr Reddy’s (up 2.24%). The key losers were ACC (down 3.70%); JSPL (down 2.57%); IDFC (down 2.26%); Maruti Suzuki (down 1.99%) and ONGC (down 1.91%).
In Asia, the Jakarta Composite gained 0.27% Markets in Japan, South Korea, China, Hong Kong, Singapore and Malaysia were closed for national holidays.
At the time of writing, the key European indices were up between 0.18% and 0.54% and the US stock futures were trading in the positive, an indication of a green opening for US stocks.
Back home, foreign institutional investors were net buyers of equities totalling Rs1,490.82 crore on Friday and domestic institutional investors were net sellers of shares aggregating Rs709.36 crore.
Provident Housing, the wholly-owned subsidiary of real estate developer Puravankara Projects, is planning to enter the Mangalore market. The Bangalore-based company is set to launch a property at Derebail, near Konchady in Mangalore. The realty major is also planning to similar initiatives in Mumbai, Delhi, Hyderabad, Coimbatore, Mysore, Pune, Baroda, Ahmadabad, Kolkata, Nagpur and Jaipur. Puravankara dropped 3.08% to close at Rs96 on the NSE.
Shree Renuka Sugars has signed an agreement with Sri Lanka’s state investment arm, Board of Investment, for setting up a $220-million sugar refinery complex at Hambantota in the South. The proposed project plans to bring inedible raw sugar from Brazil in bulk and add value locally by refining it in the complex. The stock declined 1.57% to close at Rs28.20 on the NSE.
Reliance Communications has awarded a $1 billion outsourcing contract to Swedish telecom equipment maker Ericsson to manage its networks across the northern and western states. Under the eight-year contract, Ericsson will operate and manage both the wireline and wireless networks in the northern and western States of India. Reliance Communications fell 0.47% to close at Rs74.90 on the NSE.
It is a debatable topic whether a healthy person really needs a preventive health check-up. If you want to avail of a preventive health check-up, the government is giving you an incentive of tax deductions up to Rs5000. Is the amount fair?
Got your preventive health check-up done? If you are in the highest tax bracket and spend Rs5000 on these tests, you will effectively be spending only Rs3,500 due to tax savings. Just ensure that you are not crossing the Section 80D limit of Rs15,000. So, if your health insurance premium is less than Rs10,000, you can get full benefit with the Rs5,000 limit for a preventive health program (PHP). The question is whether you really need it? If so, is Rs5,000 enough for a preventive health check-up?
PHP is often hard-sold to people. The fact that the finance ministry has made PHP eligible for tax savings has spelt happy days for medical marketers in a segment that is already galloping at 13% every year. People buy PHP as insurance. If they are found to be healthy, then the money 'wasted' on PHP is good news. Is it correct? According to Prof Dr BM Hegde, cardiologist and former vice chancellor of Manipal University, "If there is no symptom, never ever see a doctor. PHP is very dangerous. When there are symptoms (can even include headache), then see a doctor. Prevention in true sense is about promoting your health, improving your immune system."
PHP is an emotional-sell that began in the West and is now spreading like wildfire among India's newly affluent with high-paying corporate jobs. The argument that something may be wrong inside your body which you may not know, makes PHP an easy sell. Dr Hegde, says, "Going for screening when one is healthy could be very, very dangerous. Medicine is not a hard science. It is a statistical science where averages are equated with normality. We have no definition of 'normal' in medical science. When average is normal, false positives and false negatives are 50%. Now imagine your position when you go for a heart check-up. You will certainly end up on the angiogram table if not on the bypass table!"
Companies involved in PHP business obviously communicate a different message Amol Naikwadi, joint managing director, Indus Health Plus, says, "Considering the rising incidence of non-communicable diseases (NCDs) and deaths caused by NCDs, the government must give greater incentive to people to go for preventive screening. We wish to have a separate category (not club it under Sec 80D limit) for preventive health check-ups so that people get a precise and clear incentive to go for a preventive health check-up."
However, there is concurrence of view from Hinduja Hospital. According to Deepak Samant, director finance, PDHinduja National Hospital & Medical Research Centre, Mumbai, "At present the limit of Rs5,000 for PHP is clubbed within the limit of Rs15,000 applicable under Sec 80D. The necessity of Mediclaim and PHP is increasing day by day. It is a well-known fact that the most effective remedy on ever swelling healthcare spends is to encourage preventive healthcare. Thus the deduction for PHP (must) be in addition to the limit of Rs15,000 under Sec 80D."
Every doctor will have a different opinion about when to start PHPs-it can range from age 30 years to never. But ideally, it is best to listen to your body for signals. Ignorance is not bliss in matters of health and there is a fine line between bravado and stupidity; it is important to know the difference.
According to Dr Sadanand Nadkarni, former dean of LTM Medical College, Mumbai, "Regular check-up was needed for those over 60. Today, annual check-ups after 65 can be physical check-up and a few simple tests. They are: blood CBC, blood sugar, serum creatinine (kidney), serum protein and bilirubin (liver), X-ray of chest (lung) ECG, stress test (heart) and vision."
If you really need to do only basic tests then the Rs5,000 tax deduction may be enough. But, does the PHP industry think the same? The argument is that Rs5,000 tax deduction for the whole family is not enough. We will find it out in the second part of the article where we will give the rates of some PHPs available in the market. Why are PHPs including high-tech tests like whole body CT scan?