Left 'em Stranded | Value Research Here's a Look at the Sectors that have been given the boot by FIIs in the past 12 months…
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Left 'em Stranded

Here's a Look at the Sectors that have been given the boot by FIIs in the past 12 months…

We look closely at sectors where FIIs have taken flight from in the past 12 months. Some of them are the usual suspects, some not. With the US tightening its quantitative easing and the rupee weakening, FII shareholding in a number of poor performing sectors and companies is expected to further go down. In the last year alone, a full one third of the BSE 500 listed companies have seen a fall in FII shareholding. Which sectors have got the boot?

Construction woes
In terms of sheer numbers, construction companies bore the brunt of FII disappointments. An economy that is tiring out, lack of clarity in policy and business economics that has taken a hit saw 21 construction companies witness a decline in FII shareholding in the last one year. Consequently, the share prices of these companies on an average declined by 35 per cent. IVRCL has been the biggest loser. FIIs reduced their holding from 28.78 per cent a year ago to 17.6 per cent currently. Revenue decline, slow movement of old orders and a debt-equity ratio of over 2x that has the company scrambling to make interest payments has seen the stock price of IVRCL crash by 76 per cent in the last one year.

Surprise knockdown: Surprisingly, the biggest FII pullout in terms of percentage point decline for a sector is not one that you would normally expect - no its not construction, not engineering and not even metals. Technology tops the list with a median decline of 7 percentage points. In times when mainstream tech companies are doing fairly well and have been correspondingly rewarded by the market, this motley group saw their share prices decline by 30 per cent on average in the last one year. Mobile value added services provider, OnMobile Global saw one of the largest falls in FII shareholding - by as much as 12.64 percentage points. In spite of perception, OnMobile'business is not particularly “hot”. An RoCE of 5.3 per cent and an acquisition of a loss making US-based company will continue to put pressure on the company to demonstrate outperformance.

Engineering - in a rut
Engineering makes its mark on this list with the second-highest number of companies being dumped by FIIs. Slowdown in order execution, weak order inflows, and the poor state of the economy could keep companies in the sector which saw share prices decline by a third in the last one year remain down and out. There were no takers for the loss making BEML which saw FII shareholding decline from 6.85 per cent a year ago to 1.69 per cent in the June 2013 quarter. A spike up in its mining and rail side business, the management hopes would help it become Ebitda positive in the second quarter of the current financial year.

No steely strength
Steel has seen some of the maximum exits by FIIs. The worst may not be over yet. Domestic steel consumption is expected to rise by only 2 per cent this year (Anand Rathi estimates) as against long-term average of 8 per cent. Realisations too remain weak. But an upbeat China factory production data that was up 9.7 per cent in July this year has boosted market expectation. China is the biggest consumer of steel in the world.
In the following days we will look at some companies that have seen significant fall in FII shareholding. We discuss what's happening in each and what you should do if you find any of them in your portfolio.
The companies include Geometric, Hero MotoCorp, Hexaware Technologies, Hindustan Construction Company, Housing Development & Infrastructure, IVRCL, Lakshmi Machine Works and Onmobile Global.

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