FII FLOWS ROBUST DESPITE DULL MARKET

Foreign Institutional Investors (FIIs) continued buying into Indian markets despite the lacklustre earnings performance holding up the market. FIIs have injected nearly USD 34 billion since January 2012, which led to multiple expansions, while earnings growth remained flat, HSBC Research said in its earning season analysis here. In Calendar Year 2012, FIIs inflow in Indian market stood at USD 24 billion taking FII ownership to record levels. The reform process initiated by the government since September 2012 has fuelled strong foreign inflows into India. Out of the largest 200 companies listed, foreign investors were net buyers of 145 companies in the quarter ending December 2012, while their ownership in nearly 50 companies was at record high levels, the report said. It pointed out that the revenue growth of Indian corporates, however, turned out to be the worst in the last three years. Revenue growth came down from 27 per cent year-on-year in March 2010 to 10 per cent y-o-y in December 2012. Sector wise, telecom, industrials, and consumer discretionary saw their earnings contract in the quarter ending December 2012, while defensives sectors such as consumer staples, IT, healthcare and utilities saw the highest earnings growth in the same period, it added. HSBC report said that telecom, consumer discretionary, and materials were the worst performers. Telecom sector saw the highest earnings contraction (-56 per cent y-o-y earnings growth) mainly because of Bharti Airtel, India's largest telecom company, which posted 12th consecutive quarterly drop in net profit. Bharti's profit tumbled 72 per cent to Rs 2.8 billion hit by high interest costs, forex fluctuation and tax provisions.
Consumer discretionary was the second worst performing sector missing street estimates by 23 per cent, mainly on account of poor show by Tata Motors and Hero MotoCorp, the report said. Industrial and materials were the other sectors which missed street expectation - some of the biggest disappointments in that space were BHEL, Jaiprakash Associate, Ambuja Cement, ACC, Sesa Goa and Jindal Steel and Power. On the other side, defensive and export-oriented sectors, such as consumer staples, healthcare, IT and utilities were the best performing sectors, it said. Private banks continues to report healthy top and bottom line growth, while public banks continue to have a poor run. Most of the big private banks, such as ICICI Bank, HDFC Bank and Axis Bank saw earning growth of more than 20 per cent. "With significant slowdown in the Indian economy, we expect overall corporate revenue to remain below par. Defensive and export oriented sectors will continue to see double digit revenue growth on the back of rupee weakness and constant demand regardless of the economic cycle. While there is a greater risk to cyclical sectors such as metals, industrials, real estate and public sector banks," the report added.

$10-billion in equity market in 2013 so far

Overseas investors have poured in USD 1.4 billion into Indian equities in March, taking the total investment tally to USD 10 billion for the calendar year 2013 so far. Foreign Institutional Investors (FIIs) infused a net amount of USD 1.4 billion (about Rs 7,547 crore) in Indian stock market in March so far taking the total inflows to USD 10 billion (Rs 54,045 crore) in less than three months of 2013. FIIs had pumped in USD 4.57 billion (Rs 24,440 crore) in February and USD 4.05 billion (Rs 22,000 crore) in January. Market analysts attributed huge inflows into Indian equities to a slew of measures taken by the government, including the postponement of General Anti Avoidance Rule (GAAR) implementation by two years to April 1, 2016 and partial decontrol in diesel prices. Additionally, easing of interest by Reserve Bank of India (RBI) and subsequent impact of improved liquidity position have further boosted FIIs inflow. During March 1-22, FIIs were gross buyers of shares worth Rs 57,303 crore, while they sold equities amounting to Rs 49,756 crore, translating into a net investment of Rs 7,547 crore (USD 1.4 billion), as per Sebi data. Foreign fund houses also infused a staggering Rs 7,373 crore (USD 1.35 million) in the debt market so far this month. This takes the overall net investments by FIIs into debt markets to Rs 14,322 crore (USD 2.65 billion) so far this calendar year. "FIIs have been infusing money into the Indian market on account of various reform measures taken by the government and change in RBI's monetary policy that has added liquidity to the system. This liquidity will help in growth of the country," Wellindia Executive Director Hemant Mamtani said. Earlier this month, RBI has slashed repo rates by 25 basis points to 7.5 per cent in its mid-quarter monetary policy review. FIIs bought equities worth USD 24.4 billion in 2012, about USD 5 billion below record purchases two years ago. As on March 22, the number of registered FIIs in the country stood at 1,757 and total number of sub-accounts was 6,322.