FIIs cut stake in these small-cap stocks during Jan-March. Did you sell any?

Indian stock indices have come to be dominated by bearish sentiments over the last couple of weeks and have fallen by a tenth from their peak value earlier this year after staying put in the consolidation zone in the aftermath of the Russia-Ukraine war that has spiked crude oil prices.

The firefighting move by the Reserve Bank of India to raise interest rates for controlling inflation in the country coupled with monetary tightening by the US Federal Reserve has spooked investors.

Foreign portfolio investors (FPIs) or foreign institutional investors (FIIs), who have become less dominant but still are an important factor determining the trajectory of the indices, had become more cautious about investing in India over the last one year.

In fact, in the October-December 2021 quarter, they were net sellers in Indian equities, pulling out over $5.1 billion the process. In the first four months of this year, too, they had shown their bearish sentiments apparent with net sales of securities worth $18 billion, bulk of it on the equities side.

We scanned through the list of companies that have disclosed their shareholding patterns to get names where FIIs cut stake. In particular, they sold stake in as many as 92 companies that have a valuation of $1 billion or more last quarter.

Top small caps that saw FII selling

FIIs cut stake in around 100 small-caps, or firms with a market capitalisation under Rs 5,000 crore. This is a fifth less than the set of similar companies where they sold shares in the previous quarter ended December 31, 2021.

In contrast, FIIs cut stake in around 69 large caps, over twice the number of such firms with a market capitalisation of Rs 20,000 crore or more, where they trimmed holding in the corresponding period. This shows they were less bearish on small-caps compared to large caps.

Godawari Power & Ispat, Olectra Greentech, Ingersoll-Rand, CCL Products India, Ceat, Heidelberg Cement, HEG and Hinduja Global Solutions were among the larger small-caps with valuation of over $500 million, to see FII sell shares last quarter.

Lower down the order, companies like ICRA, Globus Spirits, IFB Industries, Indoco Remedies, Greaves Cotton, Dhanuka Agritech, Ahluwalia Contracts, India Glycols, Arvind, GE T&D India, Dhani Services, Indo Count Inds, Gokaldas Exports, LT Foods and DCB Bank also saw offshore portfolio investors turn bearish.

Indo Count, IFB Industries, ICRA were stocks that have now seen FIIs cut stake for two consecutive quarters.

If we look at small and micro-cap stocks with a valuation of at least $100 million, where FIIs sold 2% of more stake last quarter, we get four names: Dhani Services, HEG, Heritage Foods and HBL Power Systems.