These are Asian Paints, NHPC, AU Small Finance, Wabco India, Teamlease Services, Mishra Dhatu Nigam, Tejas Networks and HOEC
The first and the most important step towards wealth creation is stock selection.
Ideally, stocks selected or filtered should be based on your own research because it has to also fit your risk profile, although you could also take the help of your investment manager.
Alternatively, studying buying habits of foreign investors and mutual funds that are heavily invested in Indian equities could help filter stocks which have value.
From April 2018 to April 2019, foreign institutional investors (FIIs) were net buyers in Indian equity market worth nearly Rs 30,000 crore, according to SEBI data. On the other hand, mutual funds were net buyers of nearly Rs 75,000 crore worth equities, data showed.
A brief look at the stocks in which FIIs and mutual funds raised stake consistently in the last four quarters could help investors filter stocks.
As many as eight stocks on the BSE saw a consistent rise in FII and mutual fund investments for the past four quarters. These are Asian Paints, NHPC, AU Small Finance, Wabco India, Teamlease Services, Mishra Dhatu Nigam, Tejas Networks and HOEC.
Table: FIIs' stake in past four quarters
AU Small Finance Bank, an Indian scheduled commercial bank that was founded as vehicle finance company AU Financiers in 1996 and converted to a small finance bank in April 2017, saw maximum buying interest.
Foreign investors and fund managers doubled their stake in the company in the last one year. FIIs held a little over 10 percent stake in the company as of June 2018, which was rose to over 23 percent by the end of March.
Mutual Fund managers also raised their stake in the company from 5 percent recorded at the end of June 2018 to nearly 11 percent as of March 2019.
AU Small Finance Bank also reported a robust set of numbers for the March quarter. The overall profit grew 42 percent YoY. It was well supported by 62 percent surge in net interest income (the difference between interest income and expenses), moderation in costs and lower provisions.
Table: Mutual funds' stake in past 4 quarters
Asian Paints from the largecap space has been the top performing stocks on 1-year basis, up nearly 25 percent in the same period while most of the other stocks in the above list are from the small and midcaps space.
Most experts feel that small and midcaps should now bounce back after recent correction as valuations now look favourable.
“After the steep correction seen over the last one year, there is valuation comfort in the small and midcap space. We find value there. As broad-based profit growth was sparse, 'growth/quality at any price’ had worked very well for the last few years,” Nitin Rao, CEO, Reliance Wealth Management told Moneycontrol.
“Most mutual funds seemed to be sitting on cash during the last two months and our sense is that they would be keen to allocate more towards the mid and the smallcap counters,” he said.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.