FIIs have been quick in spotting opportunities across sectors such as telecom, finance, healthcare, IT, insurance, FMCG and agri stocks.
Foreign institutional investors (FIIs) that have poured in more than Rs 30,000 crore in the Indian equity markets (excluding debt) raised stake in 141 companies in the last three quarters of 2019.
Of these 141 BSE stocks, 18 have rallied 50 percent during the period. FIIs have been quick at spotting opportunities across sectors such as telecom, finance, healthcare, IT, insurance, FMCG as well as agri stocks.
Stocks that rose more than 50 percent include Capri Global, HDFC Life Insurance, Dr. Lal Pathlabs, Narayana Hrudayalaya, JK Cement, SBI Life Insurance, Adani Transmission, Info Edge, AstraZeneca Pharma, HDFC AMC and Aavas Financiers.
“FIIs placed their bets on stocks with a good track record with the hope that these stocks would drive the rally in midcap and smallcaps on the signs of economic andearnings recovery,” Ajit Mishra, VP – Research, Religare Broking Ltd, told Moneycontrol.
“We feel attractive valuation could be one of the key parameters that may have driven FIIs to certain smallcap and midcap stocks. Further, stocks like ONGC (high dividend yield stock), HDFC AMC, Asian Paints, SBI Life, Dr. Lal, IGL, etc. are fundamentally sound stocks and are market leaders in their respective industries.”
Most of the stocks in which foreign investors raised stake are from the small and mid-cap space. There are more than 60 stocks in which FIIs holding is above 10 percent. These include ZEE Entertainment, Kajaria, Shriram Transport, REC, IIFL Finance, AU Small Finance, Strides Pharma, MAX India and Tata Global.
“There is a value play in midcap and smallcap and it's very much stock specific. This space has been down for quite some time and there were stocks that were available at very much cheaper valuations,” Mustafa Nadeem, CEO, Epic Research, said.
“Some of the stocks we are seeing in the list are having consistent business growth in double digits. Having FII investment is one of the key filters investors can use when they filter out stocks based on where the smart money is going but that isn't the case every time.”
Before pressing the buy button, investors should also screen stocks based on corporate governance, valuations and growth outlook. Consistent investment by foreign investors could be just one filter to identify the stock, suggest experts.
“FIIs raising stake is definitely a good sign but I believe as an investor, one must do their own fundamental analysis before investing in a company. FIIs are very nimble-footed and make their decisions very fast, this quality helps them to spot outperformers very quickly but the pitfall is they are equally quick in selling the stock,” Atish Matlawala, Sr Analyst, SSj Finance & Securities, said.
“There are few stocks like Tata Global beverages, Kajaria Ceramics, and AU Small Finance bank on which we have a positive view and believe can give good returns over the medium to long term.”Disclaimer: The views and investment tips expressed by investment 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.
Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.