This article first appeared in the December, 2009 issue of Wealth Insight magazine and charts the investment pattern of FIIs till November 30, 2009.
Foreign Institutional Investors (FIIs) are major drivers of stock markets, globally. In good times they power the indices to new highs and in bad times, when government’s in developed countries are being forced to follow loose fiscal and monetary policies, they still provide the fuel for a major rise — after the initial hiccup that leads to mass-scale retreat as was seen in India in 2008.
The post-meltdown effect has been playing over the last six months, with FIIs emerging as mammoth net buyers, causing indices like Sensex to register 100 per cent gains on the back of some $15 billion of inflows. This is clearly a game of carry trade against the dollar — where debt can be taken at almost zero per cent rates in the U.S. and the money is dispatched abroad where opportunities exist to gain 10-to-20 per cent. Based on this trend Wealth Insight looked for those stocks on which FIIs have put their biggest bets. We looked at the top 10 of 35 companies revealed.
AIA Engineering, world’s second-largest manufacturer of high-chrome mill internals, specialises in design, manufacture, and installation, which find application in cement, mining and thermal power industries. AIA is being powered by steady demand from cement companies both in India and abroad. In its second quarter results, consolidated net sales were at Rs 218.30 crore and net profit was at Rs 41.97 crore.
Another company that has received much attention from FIIs is Uttam Galva Steels, a specialist in galvanized steel, which came into the limelight after ArcelorMittal decided to buy a stake in it. It’s intention of using the joint venture to grow its India business and transform the company from a galvanized player to an integrated steel maker looks to have gone down well with foreign analysts.
Sterlite Industries is a non-ferrous metals and mining company. In addition to it’s three primary businesses of copper, zinc and aluminum, it is also developing a commercial power generation business that leverages an in-house capability in building and managing captive power plants to support its primary businesses. But, on the back of diving zinc prices, it reported a 25 per cent fall in second quarter profit.
Non-banking financial company, Sriram Transport Finance is into commercial vehicle finance. The company is known for charging top rates for loans and keeps its loan book healthy. In its second quarter it reported a rise in net profit by 25 per cent (YoY). While FIIs are pouring money into the stock, ChrysCap, a private equity fund, made a quiet exit, after five years of making investments worth Rs 100-120 crore.
Mindtree is an international IT consulting and implementation company. It is structured into two units: Research & Development (R&D) and IT Services. It has posted a net profit of Rs 49.88 crore for the second quarter, which is a dip of 12.1 per cent QoQ, but profit has increased 33.8 per cent on a YoY basis. Revenues were Rs 314.98 crore, growing 3.4 per cent QoQ.
NIIT’s fame has crossed many borders as it boasts of a first-mover advantage in the Indian hi-tech learning business. But, its performances have been tardy. In its quarterly results the company saw net profit contract 11 per cent (YoY) and its sales increase by one per cent.
Advanta India is a multinational corporate with interests in research, development, production, distribution and marketing of hybrid crop and plant seeds for agricultural use. The company incurred a Rs 12 crore loss in September, 2009 quarter, compared to Rs 7 crore loss it had to suffer in September, 2008.
One of India’s largest sugar refiners, Shree Renuka Sugars, has acquired production facilities of VDI, Brazil. This has not only put it on the global map, but its strong positioning leads many to expect a great deal more in future.
Colgate-Palmolive occupies the FMCG segment in the Indian personal & household care products manufacturing space. Its net profit went up by 15 per cent on a YoY basis. It was a favoured stock during the downturn as it fell by less when compared to the Sensex.
Dabur India, another FMCG giant posted a robust top-line growth which was volume-driven growth across its key categories and a strong growth in its International Business Division. Its net profit grew at 47 per cent QoQ compared to the net sales, which went up by 10 per cent.
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