**[investwise]** MS: Ownership Matters? If FIIs own 20% Of The Frontline stocks, then it should! [1 Attachment]

 

[Attachment(s) from Maverick included below]

A $ 1 bn in selling by FIIs brings index down by 1000 points in a week. A couple of billion dollars in selling will bring BSE Sensex to below the pre-election May 17, 2009 levels. So it should be simple to identify shorts-sectors owned by FIIs. Right? Key Debate: Does institutional ownership drive stock/sector performance? • Conclusion: We have worked with over 2,000 data points on ownership and forward stock returns. The conclusion is quite clear: On its own, ownership has very little to do with prospective stock returns. Indeed, the relationship both for short-term and long-term returns is random (see charts on page 3). The results do not change whether we define ownership relative to an index or as an absolute number (which is FII stake in a company). • Summary of Shareholding Changes for the QE March 2010: Domestic institutions (including insurance companies and mutual funds) have been net buyers (up 50bp QoQ) for 12 consecutive quarters, and their ownership ended the quarter at a seven-year high. During the quarter, FII remained buyers of Indian stocks for the fifth consecutive quarter (up 40bp QoQ) for our sample of 75 large cap companies.  The FII ownership for the sample is now at 19.5%, an eight-quarter high. Shareholding of controlling stakeholders, on the other hand, declined to its lowest level since Jun-06 (down 1.2% QoQ). Households remained marginal buyers. FII stake in the broad market (1,200 NSE listed stocks) went up marginally and touched a six-quarter high (at 17.1%) while controlling stake holders sold for the third successive quarter and brought down their average stake to a 16-quarter low at the end of the quarter. • Key Sector Positions of Institutional Investors:: Institutions, on an aggregate, sold Materials, Consumer Discretionary, Industrials, Telecom, Technology and Healthcare, and bought Financials, Utilities, Energy and Consumer Staples (all in that order). Institutions at the end of the quarter appear most overweight (versus the MSCI India sector weights) on Financials, Telecoms, Staples and Industrials, whereas are most underweight on Technology, Energy and Materials. The largest change in sector position for domestic institutions (including insurance companies and mutual funds) was Utilities, with a 131bp increase in its overweight position, followed by Materials, for which underweight position increased by 92bp. The three largest overweight positions are Industrials, Consumer Staples and Utilities, whereas the biggest underweight sectors are Technology, Financials and Energy. FIIs appear to be overweight in three out of the 10 MSCI sectors with Financials in the lead position in their portfolios followed by Telecoms and Consumer Discretionary, and biggest underweight positions are in Energy, Materials and Industrials. FIIs sold Industrials and Materials while purchasing Financials and Energy during the quarter ended March 2010. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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MS-OwnershipMatters.pdf

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