Foreign Investors Increase Stake In 48 BSE-500 Companies. Here Is Why

Foreign Institutional Investors have been sellers in Indian equity markets since the start of this year and have so far sold shares worth Rs 1,68,872 crore in Indian markets, data from National Securities Depository Limited (NSDL) showed. Despite being net sellers in Indian markets they have been increasing their stakes in some of the Indian companies over the last four quarters, data from Ace Equities showed. 

Silver Lining In FII Selling 

Among the companies included in BSE 200 index, FIIs have increased their stakes in Siemens, Voltas, Glaxosmithkline Pharmaceuticals, Pfizer, The Indian Hotel Company, Gillette India, Indian Oil Corporation, NTC, Oil India, Alkem Labs, NHPC and Hindustan Aeronautics. 

Among the companies included in the BSE 500 index, FIIs have increased their stakes in 48 companies and the sharpest increase in stakes has been in BEML. The FIIs have increased their stake in BEML from 1.36 per cent to 6.15 per cent at end of March quarter of 2022. 

FIIs have also sharply increased stake in Gujarat Narmada Valley Fertilizers and Chemicals from 11.68 per cent to 22.39 per cent at the end of March quarter. 

Chambal Fertilisers and Chemicals, Uflex, Lakshmi Machine Works, Siemens, Voltas and GSK Pharma and Pfizer have also seen sharp increase in their stakes. 

What Are FIIs Buying 

Most of the companies where FIIs have increased stakes are from defence, fertilisers, agro-chemicals and pharmaceutical space. 

Government’s focus on Make in India in defence space and make India as defence manufacturing hub is luring foreign investors towards companies in defence space, analysts said. While fertilisers and agrochemical shares are witnessing buying interest as countries renewed their focus towards food security issue, they added. 

The government has approved the Production-Linked Incentive (PLI) scheme for drones and drone components. The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector.

In 2020 ministry of defence notified two “positive indigenisation lists” dated 21st August, 2020 and dated 31st May, 2021 of total 209 defence items.

India’s requirements on defence are catered largely by imports. The opening of the defence sector for private sector participation will help foreign Original Equipment Manufacturers (OEMs) to enter into strategic partnerships with Indian companies. This will enable them to leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, it will also bolster exports in the long term.

Since 2014 the Ministry of Defence has signed more than 180 contracts with the Indian Industry, as of December 2019. These contracts were valued over $25.8 billion, according to Defence Ministry.

“Defence related investment themes are in focus as government is working towards making India a defence manufacturing and globally there is interest that India could be the at least in South East Asia a major defence manufacturing hub with shift from China to India could benefit. Moreover, our indigenously developed missiles like Brahmos and light commercial aircraft like Tejas have been in demand as their maintenance is cheap compared to Russian, American or European counterparts,” Vijay Chopra of Enoch Ventures told Outlook Business. 

Meanwhile, agrochemicals and fertiliser shares are witnessing buying interest on the back of renewed focus of governments towards food security and increasing food production after Russian invasion of Ukraine disrupted global supply chains, Chopra added. 

Russia’s invasion of Ukraine has adversely affected fertiliser industry that has been hammered by various events for more than a year. Russia typically exports nearly 20 per cent of the world’s nitrogen fertilizers and, combined with its sanctioned neighbour Belarus, 40 per cent of the world’s exported potassium, according to analysts at Rabobank. Most of that is now off limits to the world’s farmers, thanks to Western sanctions and Russia’s recent fertilizer export restrictions

"After the recent market correction, foreign investors are once again chasing stocks in the growth sectors like defence, chemicals, agro products etc. The recent order wins and sales growth numbers from few stocks in these sectors have also kept investors interested in them. However, whether the FII buying in these segments continues or not will depend on how the companies manage to tide over the economic cycles," added Tanushree Banerjee, co-head of research at Equitymaster.

Meanwhile, in total FIIs bought stakes in 48 companies listed on BSE 500 index while they reduced stakes in 56 companies which include the likes of Bajaj Finance where they have cut down their stake to 21.41 per cent from 24 per cent during the March quarter or 2021.  

Some prominent Nifty 50 companies where FIIs have reduced stake include HDFC Bank, Hero MotoCorp, Kotak Mahindra Bank, HCL Technologies, Ultratech Cement, Tata Consultancy Services, Tech Mahindra, Adani Ports and SBI Life, data from Ace Equity showed.