Indian market climbed all wall of worries to hit a fresh record high in November and the journey has continued so far in December as well. The S&P BSE Sensex rose above 45,500 while Nifty50 also conquered 13400 levels.
Foreign institutional investors (FIIs) have been net buyers in the cash segment of the Indian equity markets while mutual funds were net sellers in the same period.
Shareholding data from the last four quarters suggests that there are six stocks in which FIIs, as well as fund managers, have consistently raised their stake every quarter, and a majority of them belong to the small & midcaps space.
Nifty and Sensex are trading at life-time high with most of the largecaps looking expensive. Prices of largecaps factor in most of the growth that will happen in the next year or two.
Stocks that were common in the buy list of MF and FIIs for the last four quarters include names like Bajaj Electricals, Bharat Rasayan, Granules India, Honda India, IndiaMart InterMesh, and Relaxo Footwear.
“Many midcaps and smallcaps are still trading at reasonable valuations leaving room for decent return over medium to long term. FII’s and MFs are shifting their focus from largecaps to small & midcaps stocks,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.
In terms of returns, Granules India has rallied over 200 percent so far in 2020, followed by IndiaMart InterMesh which rose more than 100 percent. Meanwhile, stocks of Honda India have fallen about 20 percent so far this calender.
Honda India is a subsidiary of Honda Motor Co Japan. It is the undisputed leader in the power products industry. It manufactures and markets a range of Portable Generators, Water Pumps, Tillers, and General Purpose Engine at its state-of-art manufacturing facility at Greater Noida.
Most of the companies in which FIIs and fund managers have raised stake can be 'buy on dips' stocks, experts said. A majority of them are focused on consumption and are recovery plays on the economy.
“All the companies where FIIx are gradually increasing their stake are looking good in terms of their current businesses. Most of them are into consumer spending and deals in bulk, which should grow in the era of online shopping,” Shrikant Chouhan, Executive Vice President (Equity Technical Research) Kotak Securities Ltd told Moneycontrol.
“Currently, largecap companies are becoming expensive in terms of price multiples. However, liquidity flow is tremendous and that would keep chasing strong and large companies,” he said.
Chouhan further added that these largecap companies would create demand that would help mid and small-sized companies to do well in the long run. Indirectly, strong/innovative companies from the universe of the mid and smallcap basket would attract investments from MFs and FIIS.
Apart from the above factors, experts are of the view that it is always beneficial to analyse the quality of management and promoters shares pledging activity or any corporate governance issues.Shrikant Chouhan, Executive Vice President (Equity Technical Research) Kotak Securities Ltd share his outlook on stocks:
Bharat Electricals and Relaxo:
Both the stocks have a bright future as these companies are capable to shift into online business. In India and in many parts of the world now digital business is growing. People have started transacting on web portals. Pre-COVID and duringCOVID, there was a massive shift to online business and payments. This has opened international markets for these companies.
I would say that the sector is doing well and reforms from the government have helped the industry heavily since 2016. The demand for pesticides and products related to health and hygiene has gone up substantially during the covid period.
Honda Power has a strong brand and well-set business. Rural developments and growth in the suburbs are helping the company on a consistent basis.
IndiaMart provides a market place for companies/customers who are engaged in doing online business. In a nutshell, it finds buyers for sellers and vice versa.
During the COVID period, many small and medium-term enterprises have started converting and registering themselves for online business and that has boosted the overall business for IndiaMart.