FIIs turn net-buyers worth $6.4 billion in June quarter

FIIs turn net-buyers worth $6.4 billion in June quarter
Business Standard, August 11, 2009, Section II, Page 1

Chandan Kishore Kant / Mumbai

Take a fancy to realty, banking & finance, engineering and oil & gas.

Initial signs of recovery in world economies, a stable government in New Delhi and the positive impact of its stimulus packages substantially improved the sentiments of foreign institutional investors (FIIs) in the April-June quarter.

After being net-sellers in the last five quarters, they turned net-buyers in the equities market in the June quarter. According to data from Enam Securities, they were net-buyers of Rs 30,720 crore, or $6.4 billion ($1=Rs 48).

However, they were selective in their buying. Only four sectors — real estate, banking & finance, engineering and oil & gas.— garnered almost three-fourths of the money invested by FIIs. These four sectors accounted for over 71 per cent of the total FII investment at $ 4.55 billion during the quarter.

Realty attracted an investment of $1.6 billion, followed by banking and financial services ($1.5 billion), engineering ($875 million) and oil& gas ($580 million).

Analysts tracking the realty sector said that the outlook was improving. Rupesh Sankhe, research analyst at Centrum Broking, said: “The three main drivers that have pushed the realty sector are price discounts (20 per cent in case of new launches of affordable housing), low interest rates and the pent-up demand of last year.”

Not so long ago, the sector was being beaten down by market players because realtors were facing severe cash crunch, which had forced many of them to sell their land-banks and exit projects.

Though things have not completely changed, many of them have started focussing more and more on affordable projects to attract demand. The government, through public sector banks and sops for houses below Rs 20 lakh, is also trying to boost demand. These government moves have also contributed significantly to the improved sentiment among investors.

Realty majors such as DLF, Unitech and Indiabulls Real Estate were especially in FIIs’ good books. In fact, these three firms have seen a huge $1.6 billion FII investment, with DLF getting the lion’s share at $961 million. Unitech and Indiabulls Real Estate have attracted $392 million and $ 247 million, respectively.

The banking and financial services sector has been the second-most favourite of FIIs. They have invested $287 million in Industrial Development Finance Company (IDFC), $281 million in HDFC Bank and $50 million in Indiabulls Financial Services in the June quarter.

According to experts on the sector, valuations of banking stocks were looking up since the start of the financial year. Bhavesh Kanani, research analyst at Share Khan, said: “Valuations of banking stocks were cheaper even in March this year. But on Monday, most of them, except for the mid-cap banking stocks, are fairly valued. Growth in liquidity in the system has led banks to make gains on the treasury front. And that is why they’ve come up with good quarterly numbers.”

In the engineering sector, construction giant Larsen & Toubro (L&T) has seen the largest inflow at $546 million, over three-fifths of the entire investment made by FIIs in this sector.

In the oil sector, Reliance Industries and Oil & Natural Gas Corporation were the top picks with FII investments of $296 million and $88 million, respectively. Analysts tracking the sector said that with the rise in crude oil prices, there were signs of some improvement in the global economy and prospects were better for oil companies.

Foreign investors were not too keen on investing in the telecom sector. In fact, they sold equities of $1.1 billion in this sector during the quarter under review.