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Profit booking and expensive valuation in select Pharma and PSU stocks resulted in a decrease in FII stake
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9 min read | Updated on June 13, 2024, 15:11 IST
SUMMARY
Expensive valuations of Indian equities, taking profit off the tables in certain stocks after stellar returns, and rising US interest rates resulted in the reduction of stake in FIIs in these stocks in Q4FY24.
Profit booking and expensive valuation in select Pharma and PSU stocks resulted in a decrease in FII stake
Generally, the thumb rule for Foreign Institutional Investor (FII) inflow into emerging markets is that a fall in US interest rates leads to an increase in FII inflows, and vice versa. Currently, inflation in the US remains above the Federal Reserve's target rate, creating uncertainty related to potential rate cuts. As a result, FIIs have turned sceptical with their holdings in the Indian markets.
As a general rule, a reduction in Foreign Institutional Investors (FIIs) stake in a company is not a good sign.
FIIs stake sale can negatively impact for several reasons
- It can signal a lack of confidence in the company's future prospects, which can negatively impact market sentiment and the stock price.
- FIIs provide substantial liquidity to the markets. A reduction in their stake may decrease the liquidity of the stock, making it harder for other investors to buy or sell shares.
- FIIs stake decrease might lead to a perception of weakening corporate governance standards.
InQ4FY24 (January to March), the FIIs stood as net sellers with net sales ₹48,626.12 equities during the period, this created panic in the market with general elections ahead. (Source - Moneycontrol)
Here are stocks where FIIs have trimmed their position significantly in Q4FY24
The lender has been under a leadership crisis, the founder and CEO Chandra Shekhar Ghosh has stepped down from his role despite his renewal being approved by the company’s board. There has been news that RBI, the regulator, had some reservations about his renewal. Its financing margin for Q4FY24 turned negative (-) 12% against positive (+) 9% in Q3FY24.
Below tables summarize FIIs substantial stake decrease in Q4FY24 in Nifty 500 companies with market capitalisation above ₹20,000 crore
| Name | Industry | FII Holding as on 31st December 2023 | FII Holding as on 31st March 2024 | Change in FII holding |
|---|---|---|---|---|
| Bandhan Bank | Banks - Private Sector | 34.75% | 31.20% | -3.55% |
| Crompton Greaves Consumer | Electric Equipment | 35.58% | 32.18% | -3.40% |
| Cyient | Computers - Software - Medium / Small | 34.11% | 31.04% | -3.07% |
| Container Corporation of India | Miscellaneous | 19.55% | 16.63% | -2.92% |
| Aurobindo Pharma | Pharmaceuticals - Indian - Bulk Drugs & Formln | 20.72% | 18.01% | -2.71% |
| Glenmark Pharmaceuticals | Pharmaceuticals - Indian - Bulk Drugs & Formln | 23.71% | 21.38% | -2.33% |
| Godrej Industries | Chemicals | 10.17% | 7.92% | -2.25% |
| (Source - Screener) |
Other companies which saw FIIs stake decrease in Q4FY24 in Nifty 500 with market capitalisation above ₹20,000 crore
| Name | Industry | FII Holding as on 31st December 2023 | FII Holding as on 31st March 2024 | Change in FII holding |
|---|---|---|---|---|
| Ambuja Cements | Cement - North India | 11.09% | 9.90% | -1.98% |
| AU Small Finance Bank | Banks - Private Sector | 41.13% | 39.37% | -1.76% |
| Dalmia Bharat Ltd | Cement - South India | 12.96% | 11.37% | -1.59% |
| Asian Paints | Paints / Varnishes | 17.32% | 15.89% | -1.43% |
| Eicher Motors | Automobiles - Motorcycles / Mopeds | 30.27% | 28.95% | -1.32% |
| Angel One Ltd | Finance & Investments | 17.27% | 17.95% | -1.16% |
| Biocon Ltd | Pharmaceuticals - Indian - Bulk Drugs & Formln | 6.55% | 5.63% | -0.92% |
| CG Power & Industrial Solutions | Electric Equipment | 16.05% | 15.18% | -0.87% |
| Axis Bank | Banks - Private Sector | 54.68% | 53.84% | -0.84% |
| Federal Bank | Banks - Private Sector | 29.38% | 28.57% | -0.81% |
| Britannia Industries | Food - Processing - MNC | 18.99% | 18.23% | -0.76% |
| Dabur India | Personal Care - Indian | 16.49% | 15.82% | -0.67% |
| Canara Bank | Banks - Public Sector | 11.21% | 10.57% | -0.64% |
| Apollo Hospitals | Healthcare | 46.25% | 45.63% | -0.62% |
| GMR Airports Infra | Engineering - Turnkey Services | 27.38% | 26.78% | -0.60% |
| Ajanta Pharma | Pharmaceuticals - Indian - Formulations | 9.11% | 8.54% | -0.57% |
| CIE Automotive India | Castings & Forgings | 5.63% | 5.11% | -0.52% |
| Fortis Healthcare | Healthcare | 23.72% | 23.24% | -0.48% |
| Gland Pharma | Pharmaceuticals - Indian - Formulations | 4.05% | 3.59% | -0.46% |
| HPCL | Refineries | 14.26% | 13.80% | -0.46% |
| Balkrishna Industries | Tyres | 12.69% | 12.24% | -0.45% |
| Godrej Consumer | Personal Care - Indian | 22.94% | 22.56% | -0.38% |
| Bajaj Finance | Finance & Investments | 20.92% | 20.55% | -0.37% |
| Coromandel International | Fertilizers | 7.71% | 7.34% | -0.37% |
| CreditAccess Grameen | Finance & Investments | 12.00% | 11.65% | -0.35% |
| FSN E-Commerce | Trading | 10.65% | 10.32% | -0.33% |
| Adani Enterprises | Trading | 14.65% | 14.41% | -0.24% |
| Bharat Electronics Ltd | Electronics - Components | 17.77% | 17.56% | -0.21% |
| Coal India | Mining / Minerals / Metals | 8.59% | 8.41% | -0.18% |
| Divi's Laboratories | Pharmaceuticals - Indian - Bulk Drugs | 14.85% | 14.68% | -0.17% |
| Bharat Dynamics | Engineering | 3.09% | 2.95% | -0.14% |
| AIA Engineering | Castings & Forgings | 18.29% | 18.16% | -0.13% |
| Bharat Forge | Castings & Forgings | 16.60% | 16.48% | -0.12% |
| Bajaj Auto | Automobiles - Scooters And 3 - Wheelers | 14.64% | 14.53% | -0.11% |
| Colgate-Palmolive | Personal Care - Multinational | 24.62% | 24.51% | -0.11% |
| Grindwell Norton | Abrasives And Grinding Wheels | 8.42% | 8.31% | -0.11% |
| General Insurance Corporation of India | Finance & Investments | 0.95% | 0.87% | -0.08% |
| ACC | Cement - North India | 6.24% | 6.17% | -0.07% |
| GAIL (India) | Miscellaneous | 14.24% | 14.17% | -0.07% |
| Gujarat Fluorochemicals | Chemicals | 4.58% | 4.51% | -0.07% |
| Godrej Properties | Construction | 29.73% | 29.67% | -0.06% |
| Bajaj Holdings | Finance & Investments | 11.57% | 11.53% | -0.04% |
| Finolex Industries | Plastics Products | 11.06% | 11.58% | -0.04% |
| Devyani International | Hotels | 12.47% | 12.44% | -0.03% |
| Endurance Technologies | Auto Ancillaries | 7.82% | 7.79% | -0.03% |
| Berger Paints | Paints / Varnishes | 10.68% | 10.66% | -0.02% |
| (Source - Screener) |
During Q4FY24 FIIs stake cut was observed across all sectors including Banking, Cement, Automobiles, Construction, Equipment manufacturing, FMCG, Pharma, Engineering, Paints etc.
In the Cement sector Ambuja, Dalmia Bharat and ACC saw stake sales of 1.98%,1.59% and 0.07%, respectively. In the auto sector, Eicher saw a large stake cut of 1.32%, and among private bankers AU Small Finance Bank saw a substantial cut of 1.76%.
Asian Paints saw a decrease in stake of 1.43% by the FIIs. The cut in stake would be attributable to a range of factors including rising interest rates in the US, election volatility in India, profit books in stock, expensive valuation of companies, and slow growth in sales with margin pressures on corporates.
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