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Last Updated : Mar 09, 2018 08:55 AM IST | Source: Moneycontrol.com

Top 20 FII heavy stocks which rose up to 200% in 2017 saw up to 60% cut in 2018

Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.

Kshitij Anand @kshanand
 
 
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Indian market which was hitting record highs just in the first month of the year 2018 came under selling pressure soon after the Budget was announced and weak global cues too played a spoilsport.

Foreign institutional investors (FIIs) which remained net buyers of Indian equities to the tune of $8 billion in the year 2017 but have now turned net sellers in the month of February.

They poured in over Rs14000 crore in the month of January 2018 but turned net sellers in February as they pulled out over Rs12000 crore, SEBI data showed.

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Plenty of stocks in which FIIs hold double-digit stake corrected up to 60 percent in the first two months of the year 2018.

It is not clear if FIIs were selling their stake but anecdotal evidence suggest that as many 46 stocks which more than doubled investors’ wealth in 2017 saw the correction of up to 60 percent in the year 2018.

Stocks like Vakrangee which rose 208 percent in the year 2017 saw a deep cut of 57 percent so far in the year 2018, followed by Jaiprakash Associates which rallied 222 percent, plunged 43 percent in a matter of just 2 months, and Forbes & Company rose 151 percent, saw a cut of 33 percent.

Other stocks which saw a double-digit cut include names like Unitech, followed by PC Jeweller, Future Consumer, Motilal Oswal, Jindal Stainless, Time Technoplast, Elpro International, Aegis Logistics, Adani Transmission, TVS Motor Company, DLF, Tata Global Beverages etc. among others, according to data from AceEquity.

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Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.

The selling is likely to continue in the future as well, suggest experts. But, on a yearly basis, FIIs investment towards Indian equity markets should turn positive.

“I think the selling will continue in the foreseeable future; we might see a rebalancing in FII portfolios allocating additional funds to developed markets as the emerging markets have gotten quite expensive,” Nikhil Kamath, Co-founder & Head of Trading, Zerodha told Moneycontrol.

“With rising interest rates, fixed income is bound to yield a higher return adding further impetus for FIIs to invest in developed markets, the implementation of long-term capital gain tax will not help garner investments either,” he said.

Cues from global market suggest that flows from foreign investors will be less than what we saw in the year 2017 largely on account of what US Federal Reserve will do with respect to interest rates and rising bond yields.

“US Fed has indicated an increase in rates for 2018, the direction of which will be set in meeting on 21st March. Increase in rates is definitely a negative event for foreign liquidity,” Rakesh Tarway - Research Head - Reliance Securities told Moneycontrol.

“At the same time, it is also determined by country fundamentals, which are improving. Therefore, FII flow might not be completely negative for 2018,” he said.

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Given strong fundamentals of India markets when compared with other emerging markets (EMs), FII flows should turn positive. However, the selection criteria should not be based on what FIIs are betting on, suggest experts.

“India’s growth story is changing from that of strong macros, weak micros to weak macros and stronger micros. Though the macro scenario is getting impacted from fiscal slippage and rising energy cost, the revival in corporate earnings is supportive for Indian markets,” Gaurav Dua, head of research, Sharekhan told Moneycontrol.

“However, the changing dynamics would result in portfolio or asset managers readjusting their allocations going ahead. The readjustment of portfolios could result in increased volatility in certain pockets of stocks. This is what investors need to focus on rather than try to preempt FII selling based on exposure to individual companies,” he said.

Most of the FIIs investment which was mostly in the largecap stocks some time back is now moving towards mid & smallcap stocks. The main reason behind such a shift in the strategy is ‘growth’.

FIIs along with domestic institutional investors (DIIs) are chasing growth and that’s what we saw in the year 2017 when most of the small and midcaps stocks more than doubled investors’ wealth last year.

“Most of the FII money comes chasing growth. And businesses which continue to grow with improvement in profitability will continue to attract FII money,” Alok Ranjan, Head of Research, Way2Wealth Brokers Pvt. Ltd told Moneycontrol.

“Over past few months, with the rise in crude and commodity prices, Indian macroeconomic conditions have deteriorated a bit. With global liquidity tightening, funds flow to emerging markets will be affected,” he said.

Ranjan further added that as valuations in the Indian market are quite rich, we can expect selective selling from FIIs to continue especially in sectors where earnings will lag expectations. However, I am not expecting a generalized selling from FIIs in Indian markets.

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First Published on Mar 9, 2018 08:54 am
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