An analysis of shareholding pattern of listed companies with market capitalisation of at least Rs 500 crore shows that FII stake has been rising in each of the last four quarters in 113 counters.
Topping the list is smallcap Axita Cotton in which FII stake has more than doubled to 12.45% in just one year. The cotton exporter’s stock has rewarded foreigner’s conviction with 305% return in the last one year, shows ACE Equity data.
Similarly, FII stake has gone up from 11.92% in The Karnataka Bank in March 2022 to 20.30% in March 2023. The smallcap bank’s share price, too, has more than doubled.
In case of Indian Bank, FII ownership rose from 1.73% to 4.17% and from 15.35% to 17.93% in case of Karur Vysya Bank. Both the bank stocks have doubled in the last 12 months.
Raymond, which was in the news recently for selling its consumer case business to Godrej in an Rs 2,825 crore deal, saw FII holding going up from 10.2% to 16.7% in a year.
Similarly, The Jammu & Kashmir Bank, Hindustan Aeronautics, Banco Products, NCC and Aegis Logistics have also seen consistent buying by FIIs every quarter since March 2022. The stocks have given a return of at least 80% in the last one year.
However, not all FII picks have proved to be prudent in the near term. Data shows that there are at least 14 stocks in which FIIs have been buying but the stocks have lost at least 20%.
On top of the list is Brightcom Group, which was a much hyped stock on Twitter but ended up being the subject of a Sebi investigation on accounting irregularities. The ad-tech company’s shares have crashed 88% but FIIs have been buying the dip.
Similarly, new-age stock Nykaa has seen FII shareholding almost doubling from 5.98% to 12.26% in one year. The stock has, however, lost over half of its market value. Others on the list are Sheela Foam, Aptus Value Housing Finance, Medplus Health, Borosil Renewables,
Spencer’s Retail, Astec Lifesciences and Network 18 Media.
What should investors do?
In the first three trading sessions of May, FIIs have already been net buyers to the tune of over $1 billion. With the US Fed now signalling a possible pause in tightening, analysts are expecting that the worst of FII outflow is over as strong earnings growth and economic recovery will play out in the remaining months of 2023.
Domestic brokerage firm Axis Securities, which has a December 2023 Nifty target of 20,400, says the current setup is a ‘Buy on Dips’ market. “We recommend investors to maintain good liquidity (10%) to use such dips in a phased manner and build a position in high-quality companies (where the earnings visibility is quite high) with an investment horizon of 12-18 months,” it said.
The ongoing March quarter earnings has so far been in line with the performance of heavyweights, such as Reliance Industries, Axis Bank, ICICI Bank, HDFC Bank, and TCS, driving the aggregate. “The spread of earnings has been decent with 79% of our universe either meeting or exceeding profit expectations. However, the growth is being led by BFSI, Technology, and O&G, while Metals, Healthcare, and Telecom recorded a YoY earnings decline for the quarter,” Motilal Oswal said.
On the valuation front, Nifty is now trading at ~18x one-year forward P/E, which is a decent drop from the level of 21x seen at the beginning of FY23.
Top stock ideas
Motilal’s list of top stock ideas include ICICI Bank, ITC, L&T, M&M, HCL Tech, Ultratech, ONGC, Ashok Leyland, Vedant Fashion, Metro Brands, MMFS, APL Apollo, and Godrej Properties.
Axis has recommended ICICI Bank, Maruti Suzuki, SBI, Dalmia Bharat, Federal Bank, Varun Beverages, Ashok Leyland, PNC infra, ITC, Aarti Drugs, Gland Pharma, Mahindra CIE, Praj Industries, CCL Products (India), Polycab India, and Bajaj Finance.
(With data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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