FIIs, domestic institutions pile into consumer goods sector

Reflecting the volatility and uneasiness in the market, institutional shareholders - both domestic and foreign - have increased their holdings in the so-called “defensive” consumer sector over the last three quarters.

A defensive stock is that which is less vulnerable than others in a bear market. The consumer goods sector is considered a defensive sector as even in a downturn people have to eat and bathe and brush their teeth.

[caption id=“attachment_67037” align=“alignleft” width=“380” caption=“The consumer goods sector is considered a defensive sector as even in a downturn people have to eat and bathe and brush their teeth. Reuters”] [/caption]

In its report on ‘Institutional Ownership Trends’, Edelweiss Securities has pointed out that the consumer sector now accounts for 10.3 percent of institutional holdings in the first quarter of the current financial year as compared to an average of 8.8 percent over the preceding three quarters.

However, divergence is visible in the ownership in other sectors. Foreign institutions continue to hold a substantial portion of their portfolio in banking, financial services, software, telecom and real estate; domestic institutions, on the other hand, are getting concentrated in the capital goods segment.

Another important trend is a divergence in foreign institutional flows and the Nifty index’s performance. Partially, this is due to the movement of funds to the mid-cap sector, which is also highlighted by the better show of the BSE mid-cap index over the broader index.

Foreign holdings in BSE 100 stocks have been coming down over the past two quarters from a high of 17.8 percent to 16.5 percent. Divergence is observed in the holdings of domestic and foreign institutions in the software sector. Foreign institutional investors hold 19.4 percent of their portfolio in software while domestic institutions hold only 7.4 percent in the sector.

According to the report, SBI, Axis Bank, Reliance and Cairn India were the stocks which saw selling pressure by FIIs. On the other hand, these institutions ratcheted up their stake in L&T and Infosys.

SBI has seen a selling of its shares worth $674 million by foreign institutions while in Cairn India they cut their positions by $606 million. Reliance saw $223-million of share selling by foreign institutions. L&T, however, witnessed buying of shares worth $291 million and Infosys of $284 million.

Foreign institutions have been net sellers for August to the tune of Rs 6,850 crore while in the current financial year, they have been buyers of Rs 6,350 crore.