Top five stocks where both FIIs and DIIs have increased their holding in Dec quarter

NEW DELHI: The S&P BSE Sensex remained volatile in the October-December quarter, whereby the benchmark index rallied just about 3 per cent compared to a 30 per cent rally seen in the calendar year 2014.

Foreign institutional investors’ (FIIs) ownership of the Indian market (BSE-200) remained broadly steady (over 20bps) around its all-time high level during a volatile Dec-14 quarter, which saw a palpable global risk-off trend, Macquarie Research said in a report.

The most reassuring aspect was domestic MFs stepping in during the FII sell-off, which was backed by their growing AUMs and steady inflows into equity funds.

According to data from the Association of Mutual funds in India (Amfi), average assets under management (AAUM) of fund houses stood at R11.05 lakh crore in the October-December quarter, showing a rise of R45,951 crore or 4.33% as against an AAUM of R10.59 lakh crore for the July-September quarter.

The market scaled new highs in the December quarter on improving economic fundamentals, onset of a rate cut cycle and benign global liquidity which should continue to support FII inflows in 2015 as well. The trend continued in the first month of calendar year 2015, where the Sensex hit a new peak of 29,844.16.

The S&P BSE Sensex rallied over 1500 points or 6 per cent in the first month of calendar year 2015, supported by strong buying by foreign institutional investors, which have poured over 33000 crore in the Indian markets.

Overseas investors pumped in a staggering Rs 33,688 crore in the capital markets last month, making it the highest investment in six months owing to easing inflation and a rate cut by Reserve Bank of India (RBI), PTI reported.

The earnings season has been mixed so far and the market's focus is shifting towards the highly anticipated Union Budget 2015 and rate cuts. That said, the pre-budget rally appears to be tiring.

Apart from that, the flurry of new stock issuance worth over US$7bn in the next 2-3 weeks will suck out some liquidity, said the Macquarie report. “We expect some consolidation,” they say.

Andrew Holland, CEO, Ambit Investment Advisors, said that they are expecting 50 bps of rate cuts after the budget, 100 bps for the year, and around 300 bps over the next two years or so. So that is a great fillip for the banking sector.

“As the economy recovers, they can enjoy more normal growth in terms of lending. Therefore, the banking sector remains a favourite for us,” he added.

Holland is of the view that the broader market will probably see better price action than the Nifty, which should be a little bit more volatile, a bit more rotational, but will probably head down from here.

Macquarie has highlighted a list of five stocks where both FIIs and MFs were bullish on in the December quarter, including names like Federal Bank, Indian Hotels, Axis Bank, IRB Infrastructure, and Gujarat State Petronet Ltd.