How are FIIs Positioned in Indian Equities ?

Ahead of the 2014 General Election Results, lets have a peek into how FIIs are positioned in the Indian Stock Market.

FIIs have largely been buyers over the past 8 months. As of Mar 2014, FIIs own 26-27%in MSCI India/Nifty stocks and own c.50% of the free float. Domestics (DIIs) continue to remain sellers, with net selling of $3.5bn in 2014 YTD. This reflects FIIs comfort on improving macro fundamentals for India relative to rest of EM as well as heightened hopes around election outcomes. FIIs are largely OverWeight India, though portfolio rebalancing towards cyclicals may be arguably yet at an early stage.

FII and DII ownership of the top 50 stocks (of BSE500, by market cap) increased in the Mar 2014 quarter, but that of the rest (small & midcaps or SMID) decreased. Since the smaller stocks have done well over the past quarter this implies that their performance may have been driven more by speculative activity rather than institutional buying. Banks has been rising over last 2 qtrs, while that in Autos has been falling. Consumer Staples, Engg & Cap goods and Oil & Gas has been rising over last 2 qtrs, while that in IT Services has been falling.

The following Chart Shows Historical FII Sector Ownership in Indian Equities

In the aftermath of Elections, a Stable government under the leadership of Shri Narendra Modi is expected as a high turnout usually results in a strong showing for the BJP and their NDA alliance. FIIs can still buy c$110-120bn worth of stocks in the MSCI India, and c$100-110bn in the Nifty. FIIs have most room to buy Infosys, Hindustan Unilever, Bharti Airtel and Apollo Hospitals. They have least room to buy HDFC Bank, UltraTech Cement, Adani Enterprises, Power Grid and DLF.