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FIIs’ Sensex ownership at record high 22.5% in Q1

Foreign Institutional Investors' ownership in Sensex hit all-time high of 22.5 per cent in the June quarter, a report says. ‘The strong inflow from the FIIs over the past five years has resulted in the all-time high FII ownership of the domestic markets at 22.5 percent as of end June,’ Bank of America Merrill Lynch (BofAML) said in a report on Wednesday.

As of end June, foreign Institutional Investors collectively held around 22.5 per cent of the market and nearly 46 per cent of the free float. This compares with around 15 per cent of total market cap and 36 per cent of free float in March 2009, it said.

However, the report said, ‘The top three stocks by value owned by FIIs remained the same — HDFC, ICICI Bank and Infosys. The top three overweight stocks are ICICI Bank, HDFC Bank and Tata Motors.’ HDFC Bank is a new entrant given the reduction in MSCI weight.

‘The financials have been the biggest overweight for FIIs for a long time. However, the overweight in financials has seen a massive jump at 10.5 times (it is now 10.5 per cent) due to reduction in MSCI weight of HDFC Bank due to foreign institutional investor restrictions,’ the report said.

Within financials, however, the government-owned banks are not well held as State Bank of India (SBI) is under-owned. The report said the domestic mutual funds have seen positive inflows and have been buyers post-elections after being net sellers for past few months.

The top four underweight stocks for both FIIs and domestic MFs are the same — HDFC, Reliance, TCS and Infosys. Software and energy are the largest sector underweights for foreign Institutional Investors.

‘The under-weight on energy is largely driven by Reliance, similar to the foreign Institutional Investors,’ Bank of America Merrill Lynch said, adding unlike foreign Institutional Investors, the biggest sector overweight for domestic funds is industrials, where they have a massive 950 basis points overweight.
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