MUMBAI, August 10 THE holdings of foreign institutional investors (FII) in the State Bank of India after the annual book closure are likely to be around 18.5 per cent. The newly updated register of books, incorporating the latest shareholding pattern in the bank as on the record date for the book closure, which falls sometime in June 1997, is nearing completion and is likely to be presented to the State Bank of India next week.

This could force the Reserve Bank of India to revise its September 1996 ban on further FII purchases in SBI. The central bank had then notified that FII holding had already reached the 20 per cent limit. There has, therefore, been no FII buying in the scrip since then.

The RBI has not revoked the ban though FII holdings in the scrip had come down due to sales by some of them. The annual book closure will finally give a clear picture as to the extent of current FII holdings in SBI.

However, since the drop in FII holdings is only to about 1.5 percentage points, the RBI may take some time before it lifts the ban. An RBI spokesperson told The Financial Express that the central bank "will have to take a view" on whether to allow fresh FII purchases till the limit is reached again.

If the ban is lifted, the RBI will have a tough time monitoring fresh investments by FIIs since their appetite for the stock remains unsated. The 1.5 per cent gap works out to about 75 lakh shares, which can be absorbed easily and quickly. The demand for the scrip from FIIs is so high that the SBI GDRs are quoted at a premium of around 50 per cent to the domestic price.

Any lifting of the ban could thus lead to a stampede for the shares, which the RBI will have to manage. The central bank normally insists on prior clearance for fresh purchases once existing holdings by FIIs reach within 4 per cent of the total limit.

But even so, it was ill-equipped to manage a similar situation last month in the case of the HDFC scrip. There was such a scramble for the scrip that by the time the RBI said the 26 per cent limit for HDFC had been reached, the FIIs had purchased more than the remaining four per cent permitted upto the 30 per cent ceiling. In the case of the SBI, the RBI may have to insist on not only on prior permission, but also a first-come-first-served rule.

The market was agog with rumours last week of an imminent lifting of the ban and brokers were said to be warehousing a large quantity of SBI shares on behalf of FIIs. This would enable them to be the first to effect the purchase, and at a lower rate, when the ban is lifted.

Share prices are known to shoot up to ridiculous highs, as in the case of HDFC and Infosys Ltd last month, when the market knows that FII demand far outstrips the limited number of shares they are permitted to buy.

Purchase was for domestic fund

Last Friday's purchase of 2 lakh SBI shares on behalf of Morgan Stanley at Rs 332.60 per share, when the ruling price was Rs 324, has added fuel to speculation that FIIs are already on a buying spree. However, Friday's purchase will not come under the FII category as the purchase order was made in the name of Morgan Stanley's domestic fund, the Morgan Stanley Growth Fund.

What has added intrigue to the entire deal is the fact that the buy order for the entire lot of 2 lakh share was placed at a single quote of Rs 350 per share, when the ruling price on the screen was around Rs 324. Also, the order was placed just three minutes before the closing of the day's session.

The single order helped the buyer mop up nearly all the sell orders on the system at an average price of Rs 332.60. The concerned broker has, however, informed the stock exchange that it was a punching error.Purchase was for domestic fund

Last Friday's purchase of 2 lakh SBI shares on behalf of Morgan Stanley at Rs 332.60 per share, when the ruling price was Rs 324, has added fuel to speculation that FIIs are already on a buying spree. However, Friday's purchase will not come under the FII category as the purchase order was made in the name of Morgan Stanley's domestic fund, the Morgan Stanley Growth Fund.

What has added intrigue to the entire deal is the fact that the buy order for the entire lot of 2 lakh share was placed at a single quote of Rs 350 per share, when the ruling price on the screen was around Rs 324. Also, the order was placed just three minutes before the closing of the day's session.

The single order helped the buyer mop up nearly all the sell orders on the system at an average price of Rs 332.60. The concerned broker has, however, informed the stock exchange that it was a punching error.Purchase was for domestic fund

Last Friday's purchase of 2 lakh SBI shares on behalf of Morgan Stanley at Rs 332.60 per share, when the ruling price was Rs 324, has added fuel to speculation that FIIs are already on a buying spree. However, Friday's purchase will not come under the FII category as the purchase order was made in the name of Morgan Stanley's domestic fund, the Morgan Stanley Growth Fund.

What has added intrigue to the entire deal is the fact that the buy order for the entire lot of 2 lakh share was placed at a single quote of Rs 350 per share, when the ruling price on the screen was around Rs 324. Also, the order was placed just three minutes before the closing of the day's session.

The single order helped the buyer mop up nearly all the sell orders on the system at an average price of Rs 332.60. The concerned broker has, however, informed the stock exchange that it was a punching error.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.