>Equity Strategy (CITI)

India Equity Strategy

Owning India Inc.: Back to … 2003

# Foreign ownership: Expected exodus takes it back to 2003 — It is no surprise that

foreigners own less of India Inc. after Oct-Dec 08 ($3.3b outflows); just as in each
of the previous 3 quarters. But the last quarter's sell-off (-1.42%) brings FII
ownership to 15.5%; this is the same level as of December 2003, or the early days
of the (last) bull market. FII ownership is still higher in value terms (Dec 03
Sensex at 5123) at approx. $94b, but the level is almost of an age gone by.

#But, domestic institutions for the first time own more than retail — This is a
landmark shift; domestic institutional investors (DII) (Insurance, MFs) own more
than direct retail – a further sign of the maturing market? (Retail volumes,
however, 4X of DII). And domestic investors (ex-promoters) now collectively own
more than foreigners for the first time in four years. The big gainers continue to be
the insurance companies; they now own 5% of India Inc, though recent growth
pangs could moderate the pace of this India Inc. acquisition spree.

#FIIs widen positions, Domestics narrow them and Financials the favorites — FIIs
get a little more aggressive as they move away from benchmarks, the Domestics
get more cautious as they cut hitherto outsized positions, and the Financials
become an even more favored sector across investors. Telecom is the disconnect
– FIIs OW and domestics UW, Industrials an OW for all, but position sizes keep on
reducing. Energy and IT remain consensus UWs across investor classes.

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