FIIs whip Everonn, Camlin: Why this love affair didn't work

The love affair of foreign investors with Indian stocks waned considerably during the July-September quarter, which was reflected in a 13 percent fall in the Sensex.

Foreign investors sold almost Rs 2,961 crore of equity during that period. _Firstpost_did a quick analysis to check the fall in foreign institutional investor (FII) holding between the June-ending quarter and September-ending quarter. Our research indicated that FII holding reduced in almost 390 companies.

Everonn Education topped the list as foreign investors reduced their holding by 15.58 percentage points to 12.17 percent by the end of the September quarter. The effect could be seen in the share price, which fell by a steep 33 percent in the past three months.

The company was thrust in the spotlight recently after its promoter P Kishore was arrested by the Central Bureau of Investigation (CBI) on 30 August for offering a bribe of Rs 50 lakh to an income tax official to help him suppress Rs 60 crore of taxable income. Maybe that had something to do with foreign investor selling?

Second on the list was stationery maker wasCamlin: foreign investors exited almost all their holdings. A large part of this turn of events, however, can be attributed to the fact that Japanese company Kokuyo acquired a 50.74 per cent stake in the company. The deal, which was announced in May, concluded in October.

Media reports said intially,Kokuyo would hold around 25 percent and would gradually build its stake. It also announced an open offer to acquire a further 20 percent at Rs 110. At the time, that price was nearly double the prevailing market price. Now, however, the stock is trading at Rs 47.

In addition, the company posted a loss for the September-ending quarter. Combine the two facts and you can see why foreign investors were in a hurry to sell their shares.

Other stocks that saw significant drops in foreign investor holding include Tata Motors DVR, IVRCL, Gujarat NRE Coke and Crompton Greaves.

Overall, risk aversion dominated sentiment during the quarter and foreign investors became wary of remaining invested in relatively riskier emerging market assets as the European sovereign debt crisis seemed dangerously close to spiralling out of control.

In October, the trend seems to have reversed some what as FII bought shares worth Rs1677.4 crore.

Will the trend continue in the current quarter? We’ll soon find out.