Foreign portfolio investors (FPIs) have increased their stake in majority of the frontline auto companies during the second quarter (Jul-Sep) of the current financial year, as the sector remained buoyant on the back of increasing margins and strong product pipeline.
Tata Motors, Maruti Suzuki, Mahindra & Mahindra (M&M), TVS Motor, Ashok Leyland and Bajaj Auto have seen an increase in foreign ownership, stock exchange data showed.
UR Bhat, director, Dalton Capital Advisors, said foreign funds increased their ownership in auto companies as it is one of the best performing sectors currently. “Despite the slowdown in the broader markets, auto companies are doing reasonably well. Not just in terms of growth, auto companies have done well in Q2FY16 even in terms of margins and profitability. Fall in global commodity prices has helped automakers save costs on buying raw materials. Although margins have increased in few other sectors as well , auto sector is the only sector currently which is showing increase in both revenue and profit,” Bhat said.
Bajaj Auto witnessed the highest gain in FPI ownership among automobile companies. Foreign ownership in India’s largest two-wheeler company by volume jumped 2.8 percentage points to 17.8% in the second quarter. Foreign funds increased ownership in M&M by 2.6 percentage points, data showed.
FPI holding in Maruti Suzuki, the country’s largest car maker, rose 0.3 percentage points to 22.1%. Maruti Suzuki last week reported a 42% on-year jump in its net profit for the second quarter. The Street remains positive on Maruti Suzuki after its Japanese parent on Wednesday raised its annual net profit forecast, citing better-than-expected earnings in India. Even auto ancillary companies witnessed a rise in foreign ownership. FPI holding in Exide Industries rose 1.6 percentage points during the quarter under review, while foreign holding in Motherson Sumi and Bosch went up by 0.2 percentage points.
On the other hand, domestic institutional investors (DIIs) trimmed their holdings in the auto sector, BSE data showed. DIIs comprising banks, mutual funds and insurance companies have reduced their stake in M&M and Bajaj Auto by 3.3% and 2.9%, respectively. DII holding in the auto sector was near all-time high in the first quarter of this fiscal.
The BSE Auto Index lost more than 8% during the period. Shares of Tata Motors tanked nearly 30% during the period amid economic uncertainty arising out of China. FPIs offloaded shares in the previous quarter, making it the worst quarter in nearly seven years. In August 2015 alone, FPIs pulled out $2.6 billion from the Indian markets, Bloomberg data showed.
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