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FIIs come back, focus on five scrips

NetScribes/Janaki Krishnan & Salil Panchal

Foreign institutional investors are back in the Indian stock markets with their shopping bags, eager to stock up before the long year-end holiday season. And they have picked five scrips as key favourites - Zee Telefilms, Himachal Futuristic Communications, Satyam Computer, Nestle, and Infosys Technologies.

According to the information available, Morgan Stanley Dean Witter is a major buyer on the Satyam, Nestle and ITC counters. On Wednesday, MSDW is reported to have picked up around 1.5 million shares of Satyam.

The Government of Singapore is also buying into Nestle, whereas the US-based Alliance has been buying into Nestle, HFCL, Infosys and NIIT at low levels.

Credit Lyonnais, Alliance, CSFB and some of the domestic private sector mutual funds like Prudential ICICI and Kothari Pioneer were buyers at the Satyam Computer counter Thursday.

Dealers said that buying by foreign investors has infused some hope into domestic funds who have also started to pick up scrips. In October, the foreign institutional investors were net sellers to the tune of Rs 1.48 billion at the Indian markets.

And what has changed in the fundamentals over the past few weeks to inspire fresh buying?

In case of Zee Telefilms, there is a view that a minor turnaround for the company is in place. There is also a view that the Rs 3.5-billion Zee-Siticable optic fibre venture is going to come through in the next week. The renewed interest amongst FIIs has been on account of the project coming through fast, with SSKI Securities advising on the deal. The Zee stock closed on Thursday at Rs 307, up 1.52 per cent, riding volumes of 10.1 million shares on the Bombay Stock Exchange.

The buying interest in Himachal has come back as the grapevine says Kerry Packer is expected to be in Bombay next week and some key announcements linked to the company could take place. Himachal closed at Rs 1,310, up 3.6 per cent over the previous close, with 4 million shares traded at the counter on the BSE.

The buying interest in Satyam comes prior to the announcement of roadshows for its ADS offering. The buying interest is expected to sustain till the roadshows end, marketmen say. The Satyam Computer scrip closed 4.1 per cent higher at Rs 344. Over 14.1 million shares were traded at the counter.

Nestle has just posted a 20 per cent net profit growth in the latest quarter on the back of a favourable input price scenario, a revival in coffee exports to Russia, and the healthy growth in domestic product categories such as chocolates and coffee. Nestle closed 1.7 per cent higher on Thursday at Rs 543.45. There were 0.1 million shares traded on the counter at the BSE.

Infosys, which fell from its local peak of Rs 8,688.25 on September 11 to Rs 6531.15 on October 16, has moved up by about 13 per cent in the two weeks since to close on Rs 7,398.45 on Thursday on the BSE. On Thursday itself, the scrip gained 1.44 per cent over its previous close.

According to a fund manager at a public sector mutual fund, "November is the time when foreign funds are flush with money, as most of the inflows into mutual funds take place at this time. This is the time for the foreign investors to pick up scrips, before they the long year-end break." This is also the right time to buy Indian paper as many of the scrips are trading close to their 52-week lows.

Rationalising the lull in FII buying in the recent past and their renewed activity, a dealer at KR Choksey said that prior to the lull, a major bout of FII buying was concentrated in IT and telecom stocks. "A lot of money was chasing a few stocks," he said.

Right after that, the FIIs started to discount the future growth of these sectors and that was when the sell-off started. The current buying spell is spread across more sectors. "The exposures are being rationalised on the market," the dealer pointed out.

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