FIIs raise stake in nearly 300 stocks that fell up to 50% in 2018

During the June quarter, foreign institutional investors (FIIs) raised their stake in nearly 300 companies, whose stocks have fallen by up to 50 percent so far this year, data showed.

The FIIs used the correction in the broader market to increase their stake in as many as 272 stocks during the quarter, according to data compiled from AceEquity.

Stocks in which FIIs raised stake include Ballarpur Industries, National Fertilisers, Jindal Stainless, Oil India, ACC, Care Ratings, Century Enka, Gateway Distriparks, MCX, and Chennai Petro, among others.

The good part is that foreign institutional investors turned net buyers in July. On a net basis, they bought equities worth nearly Rs 100 crore while for the year FIIs have sold equities worth over Rs 500 crore.

FIIs also sold or reduced stake in as many as 285 companies during the June quarter, including Shriram EPC, GTL Infrastructure, IVRCL, Ziocom, Jaiprakash Power Ventures, Bajaj Hindustan, Quadrant Televentures, GTL Ltd, HCC, and Fortis Healthcare, among others.

They held their stake constant in over 100 companies in June quarter which include names like Gujarat NRE Coke, Gujarat Foils, Sakthi Sugars, Mysore Paper, Indosolar, Zydus Wellness, NMDC, The New India Assurance, Coal India, Bharat Financial, as well as Mawana Sugars among others.

Indian markets remained under pressure in the June quarter, weighed down by regulatory headwinds, fall in the rupee, rise in crude oil prices, global trade war fears, tightening of monetary policy by major central banks including RBI, and selling by foreign investors.

But, after a turbulent June quarter, the bulls managed to regain control in July, thanks to stable June quarter earnings, favourable global cues, fall in crude oil and a stable currency.

On the earnings front, most analysts are factoring in a double-digit recovery in earnings in FY19-20, which should further boost Indian markets.

Historical data shows that there is a good correlation between earnings growth and market returns over the long term, although there could be intermittent divergences in the short term.

"Markets have moved up on the back of a recovery in corporate earnings and generally good corporate results. Consumer sector has seen pick up volumes, IT has benefited from a depreciating rupee, and private financials have mostly also delivered results in-line or better than expectations," Sampath Reddy, CIO, Bajaj Allianz Life told Moneycontrol.

"Over the past few years, market returns have largely been contributed by P/E expansion, as corporate earnings growth had been muted. However, going forward, we expect corporate earnings growth to recover meaningfully in FY19 and FY20, on the back of a recovery in earlier underperforming sectors. Therefore, we believe that future market returns are going to be guided by corporate earnings growth rather than PE expansion," he said.