WHAT ARE THE "FII STOCKS?"

By Ruma Dubey

It is always very fascinating to know where exactly or what which are the stocks in which the Foreign Institutional Investors (FIIs) are investing. No doubt, FIIs are the game changers and what they do matters to most on Dalal Street as the belief is that stocks which they buy will soar. We perceive FIIs to be something akin to a cushion – they give comfort and protect from the bumps. Before we question whether it is right to have so much faith in FIIs, let us have a quick look at their most preferred stocks.

These are the usual suspects and there is really no big surprise here. What is fascinating to know is that FIIs hold more than 1% stake in 454 stocks at end of Q1FY17; the top ten FIIs alone hold shares worth a staggering Rs.2 lakh crore.

Prime Database conducted this study and showed that Europacific Growth Fund is the largest in terms of money invested, with 8% of its net assets invested in India and holds over 1% stake in 16 companies, worth Rs.52,000 crore. Which are its favorite bets? With a preference for private sector banks, it holds stake in Axis Bank, ICICI Bank, HDFC Bank and prefers the bluest of the blue chips, low risk stocks like Maruti, Tata Motors, Grasim, Reliance Inds, Idea Cellular.

The second biggest investor is Govt of Singapore and has invested in 33 companies and it has some of the same stocks – HDFC, HDFC Bank, DLF, Lupin, M&M, Infosys, Dr.Reddys.

Another equally big FII, Oppenheimer Holdings and Oppenheimer Emerging Markets has stakes in 14 companies and has good stakes in HDFC and Infosys, Shriram Transport, Biocon amongst its top holdings. Government Pension Fund Global has the highest number of stakes in Indian companies – 77. And it holds in many mind cap companies like PI Industries, Ahluwalia Contracts, AllCargo Logistics, Century Plyboards, IIFL Transportation but most companies, it holds less than 1%.

Data available on BSE200 firms showed lenders such as HDFC, ICICI Bank, SKS Microfinance ( now Bharat Financial Inclusion), Indiabulls Housing and Infosys are some of the stocks where FPI holding was in excess of 50%.

Other top favourite stocks include IndusInd Bank, Dr.Reddy’s, HDFC Bank, Zee Entertainment and UPL.  Just Dial, HDIL, Hathway Cable, M&M Financial Services, Strides, Shasun, Info Edge are also amongst the FII pursued stocks.

What emerges from these choices is that private sector banks, logistic companies, Pharma, Infosys are amongst the most preferred. Sectors which they have avoided big exposure are telecom, metals, textiles, power, commodities and now even IT.

The list of stocks and sectors are all safe bets and they rarely or rather invest in penny or small cap stocks. We cannot blindly follow and buy what they buy. You and they are in two completely different situations and would be foolish to merely do what they do. FIIs have peer pressures to follow their herd but we do not. Warren Buffett has often talked about the “institutional imperative” where like a herd, investors follow each other, even if they know it is not logical as they do not want to “miss out”; not having the guts to take contrarian calls. This is ditto for FIIs and as well as DIIs as both are following their own herds.  And that also probably explains why mutual funds are not really fancied by Indian investors.

And we as independent, intelligent investors do not have such peer pressures to follow any herd. After all, you make your own destiny, not by blindly following the path of others.