Institutional investors buy ‘out-of-favour’ sectors in July

Market blues

Infrastructure, media back in favour

Domestic institutions remain net buyers

IPOs dumped on listing day

What are institutional investors buying, with the Sensex hovering at 13k levels?

Mid-cap stocks in out-of-favour sectors such as real estate, infrastructure, automobile, media and banking appear to have come back into the “buy” list of leading FIIs in July, data on bulk deals disclosed to the exchanges show.

Buying interest appears to have dwindled in “defensive” sectors such as pharma and IT, which were aggressively bought in the preceding months. FIIs have also resorted to selling newly listed IPOs, on their debut.

Business Line analysed the trail left by institutional investors in bulk deals data since May.

Bulk deals

Transactions disclosed in bulk deals usually indicate high levels of conviction because of the large proportion of the outstanding shares transacted.

George Soros-backed Quantum M buying shares worth in Rs 121 crore in Jain Irrigation, HSBC Global Investment Fund spending Rs 60 crore in picking up shares in Puravankara Projects, Quantum again buying shares valued at Rs 46 crore in Jai Corp, were some of the prominent bulk deals in July.

Lehman Brothers took the bulk deal route to buy into Triveni Engineering, like Goldman Sachs Investments which bought shares worth Rs 14 crore in Simplex Infrastructures.

Other companies where significant sized deals happened were Prajay Engineers, Nitco Tiles, Bihar Tubes and Ahmednagar Forgings.

Net selling

This said, institutions continued to sell more than they bought in recent months, with total ‘net selling’ actually climbing from Rs 320 crore in May to Rs 580 crore in just the first two weeks of July.

Bulk deals show FIIs indulging in ‘net’ selling while domestic mutual funds bought on a net basis on all three months.

Mutual funds such as Reliance Mutual Fund, Templeton MF and HDFC MF and domestic institutions such as LIC have been the counter-party to FII sales.

In fact, while FIIs have sold shares worth above Rs 450 crore each month in the period starting from May to July, domestic biggies have kept faith by remaining net buyers.

SEBI data show that mutual funds have bought shares worth nearly Rs 10,000 crore so far in 2008 while FIIs have dumped shares valued at Rs 27,000 crore.

But neither seemed to have conviction in newly listed stocks, as both domestic and foreign investors have sold IPO shares shortly on listing.

Anu’s Laboatories, First Winner Industries, Sejal Glass, Bafna Pharma, Avon Weighing and Aishwarya Telecom are some of the examples of this trend.

This trend is in contrast to the scenario even 6 months ago when institutions bought shares of newly listed stocks through bulk deals.

Kumar Shankar Roy
Srividhya Sivakumar

The Businessline dt. 13 7 2008