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Foreign institutional investors (FIIs) who were net buyers and bought shares worth about Rs 1.7 lakh crore in 2020 raised stake in more than 400 companies sequentially in the December quarter, data from AceEquity shows.
Of the 457 companies they raised stake in on quarter-on-quarter basis, 68 have more than doubled investors’ wealth since June 30, data shows.
Some of the companies in which FIIs have raised the stake include Tejas Networks, Indo Count Industries, Somany Ceramics, Hindustan Foods, Tata Elxsi, and Tanla Platforms.
There are only 13 stocks with a market cap of more than Rs 20,000 crore in which FIIs raised stake in the December quarter. These include Maruti Suzuki, Wipro, Asian Paints, Kotak Mahindra Bank, ICICI Bank, HDFC, Infosys and HDFC Bank, etc. among others.
Data suggests that FIIs are chasing growth and the majority of the stocks in which they increase their stake are from the small and midcaps space.
Small and midcap indices have underperformed the benchmark indices Sensex 30 and Nifty 50 over the last three years. Since their all-time highs of 2018, small and midcap indices have trended lower and dropped significantly till March 2020. This resulted in the opening up of extreme value opportunities for all investors, experts said.
“While stocks from these market caps have done well over the last eight-nine months, the coronavirus pandemic, government’s initiatives of Atmanirbhar Bharat, PLI schemes, etc have given a new lease of life to small and midcap companies,” Gopal Kavalireddi, Head of Research, FYERS told Moneycontrol.
“Indian economic recovery is still at a nascent stage and trying to get back to normalcy. With the government making serious and concrete overtures in providing the right measures to uplift businesses and the economy at large, many of the small and midcap stocks could emerge as winners over the next 18 -24 months,” he said.
Kavalireddi added that individual investors should work towards identifying future prospects related to certain companies that can enter a prolonged phase of growth, thereby providing consistent and superior returns over the next three-five years.
What should investors do?
After a strong rally in the small and midcap space, especially in the stocks which have seen buying from FIIs, experts advise investors to book some profits.
“The stocks which have generated more than 100 times return belong to different sectors. This diversification indicates that there has been a lot of value buying in recent times. Most of the stocks have generated returns higher than their respective sectoral index,” Likhita Chepa, Senior Research Analyst at CapitalVia Global Research Limited told Moneycontrol.
“Also, most of the stocks are trading at a P/E which is significantly higher as compared to its industry or peers. For instance, the P/E of Tata Elxsi is 49.26 whereas the P/E of Nifty IT is 33.40. Most of the valuation ratios are signaling towards booking profits for short-term investors as the stock prices are expected to correct ahead,” she said.
Chepa added that looking at the valuations in June 2020, long-term investors can consider holding the stocks or rebalancing as per their risk appetite.
Profit booking is already in progress in some of the stocks, Kavalireddi said. Having run up quite swiftly over the last few months, stocks across IT, pharma, metal, cement and auto spaces are witnessing profit booking.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
