Take a look! Top 10 stocks on FIIs buy and sell list in the last two quarters

FIIs have been busy shedding stake in companies in sectors such as autos, pharma, steel etc. A sharp drop in FII holding could be taken as a warning sign that fundamentally does not support the current price trend.

Top ten companies where FIIs decreased their holding in the last 6 months include names like Dr Reddy’s Laboratories, Aurobindo Pharma, Jindal Steel, Divi’s Laboratories, Britannia Industries, Tata Motors, Adani Ports, Lupin, ACC, and UPL.

FIIs reduced their holding in Hero MotoCorp and United Breweries after increasing in the last two-quarter which suggests caution.

If we closely monitor FIIs portfolio then up to 30 percent is concentrated in stocks like Infosys, HDFC Bank, HDFC, TCS and Reliance Industries.

The foreign institutional investors pulled out nearly Rs 1400 crore so far in the month of May and history suggests that there is 50 percent chance FIIs will turn net sellers in this month.

Although, ‘Sell in May and go away’ is a well-known trading adage for global markets such as the US but for India FIIs have turned net sellers in 5 out of last 10 years, according to data collated by Moneycontrol.com.

The sell-in-May-and-go-away strategy comes in handy to avoid the typically volatile May-October period. However, for India, analysts are more optimistic about Indian market but does not rule out a possibility of some consolidation considering markets are trading at record highs.

“The ‘Sell in May and Go Away’ strategy is more applicable to the US markets and not India. In India, this saying shows a mixed trend. In India May month is typically a continuation month as the prevailing trend normally continues,” Deepak Jasani, Head - Retail Research, HDFC Securities told Moneycontrol.com.

“In India, we have historically seen the markets either topping out of bottoming out between November and February. We don't think May will be a topping out month this year for India. If at all we may see some consolidation for a few months followed by the next leg up,” he said.

What should investors do?

Investors should not blindly buy or sell what FIIs are doing, but they could take cues from the trend and shortlist their stocks to bet. If the stock is looking overvalued according to your estimates and also features on the sell list of FIIs then it will be better to book profits in that stock.

"Increasing or high FII holdings in a stock, irrespective of its market capitalization, may be an indicator of the improvement in business fundamentals of the company. However, it is also important for an investor to understand the investment he/she is getting
into," Hitesh Agrawal | EVP & Head – Retail Research, Religare Securities told Moneycontrol.com.

"It must be noted that the risk-taking ability and the investment horizon of an FII vis-à-vis an individual investor could be considerably different, which could be the distinguishing factor while making the investment call. Moreover, during times of market turbulence, FII heavy stocks may face greater volatility, which may be difficult for an individual investor to handle," he said.