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FIIs reduce stake consistently in 40 largecaps in 2020: Time to book profit?

Experts are of the view that FIIs have largely reduced stake to book profits as broader markets underperformed in the last two years and much of the allocation was into largecaps.

December 30, 2020 / 09:56 AM IST

Foreign investors (FIIs), which were net buyers in Indian markets in 2020, reduced stake in more than 40 largecaps stocks with a market-capitalisation of more than Rs 20,000 crore, data from AceEquity showed.

FIIs have turned net buyers of Indian equities worth more than Rs 1 lakh crore, and most of the money went into the small & midcap space.

There are as many as 41 stocks that have a market-capitalisation of more than Rs 20,000 crore in which FIIs reduced stake so far in 2020.

Stocks in which FIIs reduced stake include HDFC, ITC, HCL Technologies, SBI, Bajaj Finserv, Sun Pharma, Tech Mahindra and Tata Steel.

Experts are of the view that FIIs have largely reduced stake to book profits as broader markets underperformed in the last two years and much of the allocation was into largecaps.

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“The reason behind FIIs decreasing their stake in large caps could be profit booking as most of these stocks belong to the high beta space. Rebalancing their portfolio could also be another reason,” Gaurav Garg, Head of Research, CapitalVia Global Research Limited told Moneycontrol.

“However, the reasons for each investor to enter or exit the stock are different in terms of risk profile, investment horizon, and returns expectations. Therefore, it is better to take decisions after considering technical as well as fundamental aspects of the stock,” he said.

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What should investors do?

FIIs reducing stake in largecap names should not be taken as a negative sign. Instead, investors should use dips to buy into quality stocks. Most of the stocks in the largecap space can be bought on dips amid bounce back in the economy and improvement in corporate earnings, suggest experts.

“The long-term story of the Indian stock market is still intact and it is better to stick with largecaps which have given consistent returns over the past years. It is advisable to add these stocks on dips and invest for long term for wealth creation,” Nitin Shahi, Executive Director, Findoc told Moneycontrol.

“ITC at these levels is a good investment idea given all its verticals are improving on a YoY basis. HDFC Ltd. is always a Buy on dips idea. Market leader in its sector with a strong balance sheet and government focus on housing are enough reasons to add this blue-chip stock to your portfolio,” he said.

Shahi also likes Sun Pharma which will be the beneficiary of Covid-19 and can give decent returns in the upcoming years. Other Stocks like SBIN, HCL Technologies, United Spirits, Lupin, Meghmi Organics are good stocks for long-term horizon.

Stocks that could be avoided include names like Indian hotels, NHPC, PVR, MRPL where FII’s have reduced their stake over the past quarters can be reduced from the portfolio, added Shahi.

Arjun Yash Mahajan, Head – Institutional Business at Reliance Securities told Moneycontrol that advises investors to avoid ITC Ltd, and NTPC as they might not come in the buy radar of the FII’s due to low ESG scores.

“Balance, other stocks should be kept on the radar and when stock prices correct, they should be looked at it again for adding,” he said.

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.
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Dec 30, 2020 09:56 am

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