Foreign institutional investors returned to buying the Reliance Industries stock after a company statement sought to clarify Chairman Mukesh Ambani's remarks on 'ownership issues'.
Mukesh Ambani's comments to a television channel last week over "ownership issues" in the Reliance group had led to a flurry of activity in FII circles over the weekend.
Brokers who handle FII business told Business Standard that they had been receiving calls from fund managers overseas on the likely outcome of the reported disagreements between Mukesh Ambani and his brother, Reliance Industries Vice-Chairman and Managing Director Anil Ambani.
Mumbai-based FII brokerages refused to comment on "stock specific developments", though one domestic brokerage, which handles FII deals, said: "No FII has pressed a sale order till now, and a few have placed buy orders at lower levels."
Gurunath Mudlapur, head of research at Khandwala Securities told Business Standard: "FIIs, as global investors, have seen that such issues arise in large conglomerates the world over. Issues of ownership and management arise as no company is run by one person." Khandwala Securities handles large FII clients' orders.
Mudlapur reasoned that the FIIs had first expressed concern over the ownership issue on Reliance founder Dhirubhai Ambani's demise, when the stock had crashed. "But this time the FIIs are wiser. Reliance is now a professionally-managed company. It is a global leader in its field of business, and nothing else is changing," he added.
Brokers confirmed to Business Standard that not a single FII had put out an adverse comment on the Reliance stock after the controversy broke out.
Indeed, Kotak Securities, which handles FII clients, put out a "buy and accumulate" recommendation this morning. Falguni Nayyar, executive director (charge of institutional equities) at Kotak Securities, told Business Standard: "Institutions are not worried much by the development. They go by valuations and the business model, and are not swayed by temporary hiccups."
Though independent confirmation was not available, brokers said almost all FIIs had some Reliance Industries stock in their portfolio.
FIIs held 22.85 per cent of Reliance Industries equity on September 30. Only two FIIs --- Janus Worldwide Fund and Merrill Lynch Capital Markets Espana SA --- held more than 1 per cent of the equity each; the rest is widely dispersed among the 600-odd FIIs registered in India.
Brokers said FIIs usually did not make investment decisions based on hearsay.
"They have a set process, because they have to document the inputs going into the decision. A fund manager will meet the company management before putting out a report to the investment committee, which is finally empowered to make decisions," an FII broker said, adding that FII enquiries "currently do not amount to more than an attempt to understand the family."