FII Holding in Sensex Hits New High in Q3: BofA-ML

Foreign institutional investors' holdings in 30 Sensex companies have reached an all-time high of over 23 per cent of the total market cap, as per data collated by Bank of America Merrill Lynch.

In March 2009, the same stood at 15 per cent of the total market cap and 36 per cent of free float, which rose to 23 per cent and 47 per cent respectively at the end of December

The steep rise was driven by the optimism about Narendra Modi Government unleashing reforms, BofA-ML Global Research said in a report today.

Foreign investors continued to pump money in Indian equities with the December quarter witnessing FII flows of more than $2 billion. This was the 9th consecutive quarter of positive inflows from FIIs, it said.

"Strong inflows from the FIIs over the past five years have resulted in all-time high foreign ownership for the Sensex.

"As of December 2014, FIIs collectively held over 23 per cent of the market and over 47 percent of the free float.

In March 2009, FIIs' hold was a little over 15 per cent of total market cap and 36 per cent of free float, BofA-ML's Jyotivardhan Jaipuria said.

He said domestic mutual funds have seen inflows and have been buyers post-elections (in April-May 2014) after being net sellers in the past few years.

Financials continue to remain the highest overweight (OW) sector for FIIs at 14.3 per cent OW, he said, and attributed this to the continuous buying by them in the segment coupled with the exclusion of most private sector banks from MSCI India index due to lack of FII room.

The December saw FIIs' pumping funds into financial stocks, making it the once again the most bought sector, largely led by SBI and HDFC.

Private banks have mere $2.6 billion headroom left for FIIs (largely led by ICICI Bank and Kotak Mahindra). PSU banks, however, are not that well held and have headroom worth $5.6 billion led by SBI, BoI and Canara Bank, he said.

On the contrary, the IT stocks reached an all-time high underweight for FIIs with all the big three software firms - Infosys, TCS and Wipro - figuring among the top-10 UW (underweight) stocks for FIIs, Jaipuria said.