D- St favourites queue up at RBI for higher FII investment limit
SNEHA PADIYATH
Mumbai, 12 November
Titan Industries, a hot favourite among investors for a couple of
years, has dropped six per cent over the past few days. The trigger
for the sudden sell- off was not the usual result disappointment or an
earning downgrade. It was sparked by a Reserve Bank of India ( RBI)
notification late last week that the company had exhausted its limit
for investment by foreign institutional investors ( FIIs). Traders
dumped the stock as they feared the move might cap upside for the
stock.
Analysts said the drop in Titan shares was a reflection of FIIs'
growing influence over Indian stocks. Prompted by FIIs' appetite for
domestic stocks, several leading companies have approached the central
bank seeking increase in FII investment limits. This is partly meant
to prevent a selloff in their stocks when they near or touch the
current limit.
In the past three months, five firms — Tech Mahindra, Tata Motors (
for its differential voting rights, or DVR, shares), HCL Tech, Lupin
and Strides Arcolab — have applied to RBI for raising FII investment
limits.
"Foreign institutions are becoming important for the Indian markets.
In the past three- four years, Indian markets have increasingly become
FII- dominated. So, we are seeing many companies asking for higher FII
limits; that is where the money is coming from," said Ambit Capital
CEO ( institutional equities) Saurabh Mukherjea.
According to the RBI guidelines, 24 per cent is the default limit for
FII investment in a company. In the case of public- sector banks, it
is 20 per cent. The 24 per cent ceiling can be raised up to sectoral
cap/ statutory ceiling, subject to the approval of the board and after
the firm's general body has passed a special resolution to that
effect.
Turn to Page 15 > JOSTLING TO ABSORB LIQUIDITY
Stockmovement of the 5 firms that want their FII investment limits raised
[1]Tech Mahindra ( 45%) [1] HCL Technologies ( 49%) [1]Strides Arcolab
( 49%) [1] Lupin ( 33%) [1] Tata Motors DVR ( 75%)
In brackets: Current FII investment limit Compiled by BS Research Bureau
ECONOMY 6 >
>FinMin mulls measures to attract FIIs and stabilise the rupee
________________________________
Click here to read more...Turn to Page 15 >
D- St favourites queue up at RBI...
FII interest in the stocks here, however, has not been broadbased. The
companies that have recently applied for increase in FII investments
are mostly from the IT ( Tech Mahindra and HCL Tech) and pharma (
Lupin and Strides Arcolab) sectors.
While HCL Tech and Tech Mahindra have received approvals, Lupin and
Strides Arcolab are waiting.
"Given the current economic environment, there are only a few stocks
for FIIs to invest in; it is difficult to rely on the mid- caps. FIIs
are restricting investments to select stocks and will incrementally
invest only in these stocks," said Sandeep Singal, co- head of
institutional equity, Emkay Global Financial Services.
FIIs have put close to ₹ 91,000 crore into Indian equities so far this
calendar year. Bankers warn, many quality companies risk the
possibility of reaching a stage where they would not be able to absorb
more FII inflows.
"The problem is not whether FIIs will invest or not. The problem is
whether or not companies will be able to absorb the liquidity. Unless
we create excellent companies, where are we going to get the capacity
to absorb the money required," asked Axis Capital Deputy CEO Nilesh
Shah.
As of September- end, FIIs' shareholding in Tech Mahindra stood at 32
per cent, double that in September last year. FII holding in HCL
technologies rose six per cent to 26 per cent during the same period.
Strides Arcolab has seen a13 per cent rise in FII shareholding to 53.4
per cent, while in the case of Lupin, FII holding rose three per cent
to 31.4 per cent.
--
CS A Rengarajan
9381011200
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