Large investors led by the Life Insurance Corp. of India, and executives at the biggest Indian companies are selling the most shares since 2010 just as foreigners plow record funds into the nation’s equity market.
Institutions and insiders at the 30 companies in the S&P BSE Sensex, the nation’s main index, sold 14.66 billion rupees ($254 million) of stocks in the January-March period, the most in any quarter since the final three months of 2010, exchange data compiled by Bloomberg show. Sales were 7.63 billion rupees in April and May, the data show. The Sensex climbed to its all-time high in November 2010.
LIC, the top insurer, and officials at companies including cigarette maker ITC Ltd. and HDFC Bank Ltd. sold even as Morgan Stanley and Deutsche Bank AG forecast the Sensex to increase at least 18 percent by end of December. Foreigners have bought a net $15.2 billion of equities this year, the highest after Japan among 10 Asian markets tracked by Bloomberg.
“While some domestic institutional investors might have a less positive outlook for India’s economy and markets, foreign funds continue to have an interest as India looks attractive relative to other emerging markets,” John Praveen, the New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, wrote in an e-mail. “A reason for insiders to sell could be to take profits after the strong gains posted by the Sensex in the past year.”
Indian stocks are outperforming their peers in the BRIC group of nations that also include Brazil, Russia and China by the most on record, data compiled by Bloomberg show. The Sensex has climbed 13 percent in the past year, the best performance among benchmark indexes in the BRIC group. Equities in the other three markets have fallen in the past 12 months.
Large investors, or funds with at least 5 percent stake, and executives sold 145.9 billion rupees of shares in quarter ended Dec. 31, 2010, a period that saw the Sensex climb to a record 21,004.96 on Nov. 5, the data show. The gauge sank 25 percent in 2011, its worst annual loss since the 52-percent slump in 2008 during the financial crisis.
LIC sold about 3.62 million shares of Dr. Reddy’s Laboratories Ltd. between Jan. 10 and May 10, according to an exchange filing. The drugmaker’s shares have climbed 19 percent this year, reaching a record on June 7.
“Selling by LIC could have to do with taking profits or raising funds to participate in the government’s share-sale program,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt., said by phone.
India plans to raise 400 billion rupees in the year to March 2014 selling stakes in state companies including Coal India Ltd., the world’s top producer of the fuel. The sale of a 9.33 percent stake in MMTC Ltd. begins today.
Executives at ITC sold shares in May as the stock jumped to an all-time high on May 30. Insiders in HDFC Bank, the nation’s most valued lender, also pared holdings last month as the stock surged to a record.
“It’s like a lottery as top executives in many Sensex companies hold a large amount of shares that they acquired, or were allotted to them, at very low valuations,” Choksey said. “Now that the shares are reaching record highs, they are choosing to cash out.”
The stakes are being reduced as Prime Minister Manmohan Singh struggles to revive economic growth. Opposition protests over alleged graft scandals have disrupted parliament, stalling bills to ease tax rules and open up more sectors to foreigners. Policy changes will slow after September as political parties prepare for elections due in 2014, according to Nomura Holdings Inc.
“Insider selling could also reflect concerns about the outlook for the Indian economy and policy uncertainty in the near term,” Prudential International’s Praveen said.
India’s gross domestic product grew a decade-low 5 percent in the year ended March, below the 10-year average of about 8 percent, official data showed May 31.