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Last Updated : Aug 14, 2019 10:13 AM IST | Source: Moneycontrol.com

MFs, FIIs bought these 16 stocks consistently in last 1yr; what should you do?

Despite the sharp correction, Nifty is still expensive compared to long term average amid faltering earnings growth. “We believe that the Nifty is still expensive at 18.2x FY20E earnings,” Motilal Oswal said in a report

Kshitij Anand @kshanand

The market has tanked since the budget on July 5. Investors have lost about Rs 12 lakh crore in terms of market capitalisation on the BSE since then. The freefall has not spared any segment of the market and has hurt large, mid and smallcap segments equally.

But this has not deterred domestic and foreign institutional investors from raising stakes in their favourite stocks. There are 16 stocks in which both, mutual fund managers and foreign investors, have raised their stakes consistently for the last four quarters.

They include Asian Paints, HDFC, Capacite Infra, Bajaj Consumers, NHPC, Tejas Networks, among others.

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“Increase in MF holdings in most of the stocks is a result of good quarterly performance, prudent management, promoter track record, market leadership in their respective industries and sound long-term growth prospects,” Ajit Mishra Vice President, Research, Religare Broking Ltd told Moneycontrol.

“There may be some consolidation in the near-term given stretched market valuations and overall weak domestic sentiments. Going forward, sustenance of strong earnings and macros like inflation trajectory, pick up in capex/investment cycle will be key triggers for further MF flows into these stocks,” he said.

Table: 16 stocks in which both FIIs and MFs raised their stake in the last four quarters. Data as of June quarter for reference.    

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Nifty and the broader market indices have fallen substantially from the recent highs. Nifty has plunged 9 percent from its record high of 12,103 while the broader market indices are down over 10 percent from their respective record highs.

Despite the sharp correction, Nifty is still expensive compared to long term average amid faltering earnings growth. “We believe that the Nifty is still expensive at 18.2x FY20E earnings,” Motilal Oswal said in a report.

“Valuations of Indian equities are near their long-period averages. The Nifty trades at a 12-month forward P/E of 18.2x, at just 1 percent premium to its long-period average of 17.9x. Nifty’s P/B of 2.6x is also at its historical average,” it said.

The report further added that at the current trailing P/E of 21.7x and forward P/E of 18.2x, Motilal Oswal sees limited triggers for further re-rating, unless accompanied by a material surprise in earnings.

Other parameters to track 


The companies with strong fundamentals, sound management, and healthy growth prospects will continue to witness strong traction, suggest experts.


“One should look for strong operating performance in Q4FY19 and Q1FY20 as evidence of strength even during weak economic conditions that India is currently passing through,” Anil Sarin, Executive Director & CIO - Equities in Centrum Broking Limited said.


He said that selling in the stocks is almost over and the stock price should be stabilizing now. Hence, the valuations are much cheaper now than it was perhaps a year ago, he said.


“If we choose mid and smallcap stocks based on the above checklist, we can expect superior stock performance in coming quarters,” he said.

Umesh Mehta, Head of Research, SAMCO Securities recommend investors not to blindly invest in companies that are picked up by mutual funds.

“In fact, that can be a starting point for research. Investors must have confidence in the management of the company and go through its fundamentals before picking a stock,” 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



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First Published on Aug 14, 2019 10:02 am
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