FIIs invest most in beaten-down stocks

There has been a surge in foreign institutional investment over the past six months. The sensitive index of the Bombay Stock Exchange has gone up by more than 100% between early March and now, mainly because of investment by foreign institutional investors (FIIs). Collectively, they have put in Rs18,677 crore between March and June 2009. Who have been the big beneficiaries of this investment? Interestingly, it is the real estate companies that seemed to be going under in late last year and early this year which have got most of the money from FIIs.

An analysis of foreign holding in 1,300 companies in the Moneylife database shows that FIIs portfolio in Unitech and DLF has increased from 8.24% to 22.79% and from 6.24% to 15.4%—a rise of 277% and 247% respectively. Investment by FIIs in Dewan Housing Finance Corporation rose from 8.56% to 20.56%—a solid gain of 240%. FII holding rose manifold in Ruchi Infrastructure (from 6.53% to 13.83%) and Indiabulls Real Estate (from 41.73% to 61.71%) also. Among other stocks in which FIIs poured money were Soma Textiles & Industries (from 17.51% to 37.11%) and IFCI (from 6.06% to 12.07%) also—a rise of 212% each.
 
The foreign buying pressure was intense only in the small-cap counters. While these stocks were the most sought after by foreigners, there were hardly any
large-cap stocks which hogged the attention. Crompton Greaves and Larsen & Toubro are two such stocks where FII investment increased. There was a lot of buying in Bank of Baroda also.
 
The surge in FII investment is an indication of renewed hope among foreigners about India. Whether they believe in the long-term India growth story or is it merely an opportunistic move to collect some short-term gain will be clear during the next correction.
—Pratibha Kamath and Subrata Das [email protected]
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    Biased austerity

    The austerity move adopted by the babus got a new dimension when corporate affairs minister Salman Khurshid pointed out that even private sector companies should refrain from doling out obscene salaries. But Mr Khurshid should also pay attention to the quasi-government companies, especially the National Stock Exchange (NSE).

    The National Stock Exchange (NSE) has created a perception of being a government entity with its virtual monopoly over running the stock market. But it has the highest paid non-promoter executives in the country, Ravi Narain, managing director, and Chitra Ramakrishna, deputy managing director.
     
    Mr Narain and Ms Ramakrishna had an astounding gross annual income of Rs6.89 crore and Rs4.21 crore respectively, besides other perks in 2008-09. The salary of Mr Narain is more than London Stock Exchange (LSE) chief Xavier Roulet (around Rs 5.6 crore) and equal to NYSE Euronext CEO’s, Jean-Fancoise Theodore (around Rs7 crore).
     
    Comparatively, NSE’s supposed competitor Bombay Stock Exchange’s (BSE) CEO Madhu Kannan earned a gross income of Rs1.6crore.
     
    Interestingly, the stock exchanges which are in charge of regulating listed companies themselves refrain from maintaining transparency. NSE refrains from giving any information via Right to Information (RTI). Even its annual reports are not easily available nor does it comply with the Comptroller and Auditor General of India (CAG) norms.
     
    The NSE has even filed a petition for a stay order on a request by the Chief Information Commissioner (CIC) in Delhi from revealing any information relating to NSE. In its petition, NSE has stated that ‘they are a non-government private sector company’ and not under the jurisdiction of RTI. But how just is the argument of the NSE not to reveal any information, considering it has large public sector undertakings like State Bank of India, Life Insurance Company (LIC) etc. as investors? If NSE is a private sector company, it is the only one to have a virtual monopoly in a crucial business that deals with million of citizens.
    - Aditya Kshirsagar [email protected]

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    Firm Fabric
    Shri Lakshmi Cotsyn Limited (SLCL) is a diversified textile manufacturer with a product range from embroidery, quilting and fusible interlining; it also has defence and army products like camouflage fabric uniforms and bullet-proof jackets. It sells many of these products to institutional clients. The company is implementing a three-phase expansion programme over FY06-09 to increase capacity...
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