FPI-heavy Stocks, Newly-listed Cos may Have Some More Pain in store

If foreign portfolio investors (FPI) that have sold shares worth more than Rs9,400 crore so far this month continue their selling spree this week, the biggest casualty would be the stock that have high overseas ownership, and those recently listed.

To be sure, among the 132 stock with more than 20% FPI holding 61 have declined between 5% and 20% last week.

All three broader indices – Sensex, BSE Mid-cap and BSE Small-cap – declined over 3.5 % last week on concerns over in flation and the US Federal Reserve’s policy tightening.

FPI-heavy stocks were heavily sold. Stock with more than 20% FPI stake, such as Mcdowell Holdings, Dr. Lal PathLabs, Info Edge India, PTC India, Metropolis Healthcare, HCL Technologies, PNB Housing Finance, Tata Communications, and Granules India, declined between 10% and 20%.

Emerging-market ETFs have specific allocation ceiling for India. Those investors in risk-off mode put in redemption orders and fund managers do not have a choice but to sell, said market participants.

“Passive money is getting withdrawn from the emerging markets including India influenced by US bond yield, Fed’s tapering decision, and expected rate hikes as a result of high inflation in the US,” said Ravi Sardana, an investment banker. “FPI- heavy stocks could be under pressure if FPI outflow intensifies.”

There are as many as 13 stocks where FPI hold more than 40% stake. They include HDFC, ICICI Bank Axis Bank, Zee Entertainment, Shriram Transports Finance, IndusInd Bank and Apollo Hospitals.

FPIs invested more than Rs80,000 crore in the initial public offers last year. Shares of Zomato and One97 Communications, the parent of Paytm, declined 15% each last week. FPIs held 11% in Zomato and 9.36 % in Paytm. Rate Gain Travel and PB Fintech shares fell nearly 9% in the last five trading sessions. FPIs held 13% and 11% in these two stocks, respectively.

“There is a significant divergence in term of how the flows are deciding the markets. Midcaps and small-caps with more larger domestic flows are holding on whereas, on the large-cap side, the large part of the selling is by foreign institutions which are large shareholders in those stocks,” said Jinesh Gopani, head of equities, Axis Mutual Fund. “There are some jitters around passive flow and clearly, it is seen across the globe where more of the ETF kind of money is leading to this sell-off,” he added.

During the first fortnight of January 2022, FPIs sold IT shares worth Rs3,000 crore and Rs1,900 crore worth of shares from the retail sector. S-ET

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