| An eye for the right chance
Mumbai, April 14: Foreign investors who missed out shopping in the public-offer season last month are not fretting — they have grabbed from the secondary market what they craved for in the new-issue section of bourses.
A record number of new registrations with the Securities and Exchange Board of India (Sebi) testify to the surging interest of overseas investors, especially US pension funds willing to wager on India’s growth potential.
On April 1, net foreign inflows into the Indian markets was to the tune of Rs 3490.40 crore. A large chunk of these funds made their way into the ONGC offer. The tally was 755 crore for April 2, Rs 318 crore for April 3 and Rs 417 crore for April 4. This fortnight should close with almost a billion dollars worth of inflows.
“As long as they don’t lose money, they’ll continue to pour funds into the Indian market,” said Arun Kejriwal of Kejriwal Research and Investment Services.
“The fact that the rupee is appreciating and the dollar is on the downtick makes their money risk free. And, there is an appetite worldwide for Indian shares,” he added.
FIIs are stepping into the shoes of retail investors, who have been selling their way out of big-name stocks. “The shareholding of small investors is gradually declining in large companies, whose floating stock is going into the hands of foreign institutions,” Kejriwal said.
A Morgan Stanley report released early this year echoes him. According to its findings, FII stake in the top 50 market-cap stocks, for instance, stood at 19.3 per cent — higher than 18 per cent held by retail shareholders.
“We estimate FII flows into stocks outside the top 50 at 68 per cent of the total in 2003. This implies that significant purchasing in mid-cap shares,” the report added.
Market watchers are unanimous in their view that the recent spate of public issues — especially ONGC, Gail, Power Trading and Biocon — has not slaked FII thirst.
“You’ll find the quarterly shareholding pattern skewed in favour of foreign investors in the recent public issues. Many have been buying the stock after the new shares were listed,” a Dalal Street analyst said.
Biocon saw its share price almost double after its listing. The company had left FIIs disappointed by setting aside only 60 lakh of the one crore shares on sale for them.
“FIIs are chasing stocks they did not get from the primary market. They are directly buying from current shareholders and venture capital funds looking for an exit,” a dealer affiliated to a foreign brokerage said.
On Tuesday, some foreign funds snapped up Biocon shares at Rs 608 each from existing investors in deals worth Rs 300 crore. This has led market mavens to believe that there is a tectonic shift taking place in the stock market —Indian retail investors in big companies making way for FIIs.
While elections are a big worry for foreign funds, they expect reforms and the divestment process to be accelerated after the general elections bring a new government. They feel current stock gambles will pay off then.