Foreigners trim stake in 21 of 30 Sensex blue-chips

With foreigners pulling out a whopping Rs 19,000 crore from Indian equities in September quarter, it is now beginning to emerge that a chunk was from blue-chip Indian stocks that form the bellwether Sensex. According to a DNA analysis, foreign portfolio investors (FPI) cut stakes in 21 out of the 30 Sensex blue-chips in September quarter over June quarter.

The list of stocks that saw the maximum reduction (in percentage terms) in FPI holdings include Lupin, Dr Reddy's Labs, Adani Ports and SEZ, Sun Pharma, HDFC, Axis Bank and ITC. Brokers say that large-cap pharma and richly valued financial stocks have indeed seen a turn in sentiment, as overseas investors chose to look for better investments in IT stocks such as Infosys, four-wheeler makers like M&M and Maruti Suzuki, and commodity plays like Tata Steel.

In the three month period to September 30, foreign portfolio investors have cut stakes at least 1% in six companies. Lupin saw FPI stake falling from 30.86% to 27.69%. Dr Reddy's witnessed a nearly 2% stake drop. Adani Ports and SEZ saw FPI stake declining from 23.52% to 21.7%. Sun Pharma and HDFC saw FPI holding dip by over 1.5% each.

If you look at banks and financial stocks, FPIs show a trend. Including HDFC, the foreigners have cut stakes in all the sectoral stocks in Sensex. While Axis Bank has seen 1% stake drop, FPIs have not spared ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and SBI. The secular trend could be due to sluggish earning expectations. "For 2QFY18 results, we expect banks to report a 5% year-on-year decline in profits (ex-SBI), but with a wide divergence across private and PSU banks; provisioning can drive volatility in earnings," Hong Kong-headquartered brokerage CLSA said.

In pharma stocks in Sensex too, FPIs seem to have turned a bit negative. Large-cap pharma stocks have been beset with problems in the US, their biggest market for generics, and growth concerns amid earnings moving into the slow lane. Lupin, Dr Reddy's, and Sun Pharma are some of the biggest generic companies from India, and foreigners have cut stake in September quarter. It's only in Cipla, more of an India-focused pharmaceuticals story, that FPIs have raised stake by 1.25% to 22.34%. "US political environment against pharma price hikes continues to turn adverse; note the laws passed by the US states Maryland and California against any predatory pricing. Generic sector though should worry about limited ability to raise prices in older mature products, a practice far more widespread than earlier believed," notes Emkay Global Financial Services.

In automobile space, FPIs trimmed exposure in Tata Motors, Bajaj Auto and Hero MotoCorp but upped stake in M&M and Maruti Suzuki. In technology space, the foreigners have trimmed stake in Wipro and TCS but hiked exposure in Infosys by over 3% in September quarter. Some top-notch PSUs in the Sensex like ONGC and Coal India also saw FPIs cutting stakes. Prominent private-sector stocks like Asian Paints, Larsen & Toubro, and Hindustan Unilever have seen saw FPI exposure reduction.

An individual investor should not have an investment strategy which follows the institutional investors in terms of buying or selling individual stocks.

"Within institutional investors as well there are numerous different strategies that they are following and hence it cannot be concluded which kind of investors are getting in or out of a particular stock. Sometimes when momentum investors are exiting a stock, the value investors start buying or vice versa, i.e. around the time when value investors start selling a stock since it is overvalued, the momentum chasers start liking it," said Vikas V Gupta, CEO & chief investment strategist, Omniscience Investment Advisers.

FPIs have in total hiked stakes in nine Sensex companies include Infosys, Tata Steel, Cipla, RIL, NTPC, and Bharti Airtel.