For months, we have been hearing Fiis i.e. foreign institutional investors have been disillusioned with India. They are continuously selling in the Indian stock market. But this is not the whole story. The reality is that foreign investors are selling largecap shares and are now putting bets on small shares i.e. smallcap and midcap shares. This is a similar game, as retail investors were playing till now.
Recent December quarter data shows that Fiis has increased the share of NIFTY 50 companies during this period and has sold shares in the remaining 41 companies. Similarly, in Nifty 100, he increased his stake in only 26 companies. But now the interesting thing is that in 44% of BSE Midcap and even 55% in Smallcap, FIIS has increased its stake.
The FIS has increased the share of 466 companies in the 937 companies of the BSE Smallcap index which have released their shareholding patterns so far. At the same time, he reduced his stake in 425 companies. The remaining 46 companies remained stable. These changes suggest that Fiis is now seeing more opportunities for earning in smallcap stocks. Whereas till now only retail investors were at the forefront of investing in smallcap shares.
Now the question arises that why did Fiis changed this stance? The answer is the boom in the IPO market. Devan Choksi of Drchoksey Finserv said that in fact, the investment in the IPO has increased the share of Smallcap and midcap shares of FIS.
Statistics show that in the December quarter, FIS sold shares worth ₹ 1.56 lakh crore in the stock market. However, in the primary market i.e. IPOS, he made a large invested of ₹ 55,582 crore. In the last one year, IPOS has given returns of 50 to 80% on listing to investors. In some cases this return was more than 100%. At the same time, big shares usually get an annual return of 10-15%. This is the reason why Fiis’s focus has increased on IPOS.
Apart from this, there is another reason behind the investment in small and medium shares of FIS. Kranti Bathini, the revolution of wealthmills seconds, said that the move of the Indian stock market is now becoming increasingly stock-specific amidst sluggishness in economy and earnings growth. Therefore, FIIs are also investing in view of valuations and strategy of different companies and hence their investment in largecap and midcap shares is increasing.
Overall, analysts say that FIIS is still distance from the Indian market due to India’s slow economic growth, weak quarterly results and better conditions in the US market. But along with this, they are also investing in good quality midcap and smallcap shares while doing Nakur.
Rajesh Palavia of Axis Securities says that Fiis selling may stop in a month or two, as India is still the fastest growing economy in the world. Its long term growth outlook is quite strong. In the coming time, union budget, announcements regarding the interest rates of RBI and good quarterly results, FIS can turn the trend of this selling. Domestic investors understand India’s economy prospects better and they are constantly shopping in the stock market unlike FIS.
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