FIIs turned bearish on these small-cap stocks in Q2. Did you sell any?

Foreign institutional or foreign portfolio investors have historically dictated the movement of Indian stock markets. However, this is changing due to the rising flow of domestic money in the local bourses, especially after the demonetisation drive in 2016-2017 and asset prices getting punctured in the real estate market.

Indeed, a lot of the current froth in the market where the benchmark indices are trading near their all-time high is attributed to the domestic investors—both local mutual funds as also retail investors.

One segment of the stock market that is usually seen as a haven for punters looking to make a quick buck with trading opportunities and retail investors who get attracted by lower per share price is the small cap space or companies with market capitalisation of under Rs 5,000 crore.

This segment tends to have a high beta and tends to swing much more in a volatile market condition.

Offshore investors usually don’t play in this segment as it tends to be below their investment mandate radar. But that doesn’t exclude FII/FPI participation wholly from such stocks. In fact, many investors and analysts try to fish for hidden gems who can be a mid or large cap over the medium to long term.

Quarterly shareholding data shows they decreased their holding in more than 200 listed companies. In nearly one in three companies, they pushed down their stake by two percentage points or more.

There were around 100 small-cap stocks with current market valuation of under Rs 5,000 where FPIs cut stake. This is around the same number of small caps where FPIs increased their stake in the quarter ended September 30.

A sector-wise analysis shows that offshore investors sold shares in companies across pharmaceutical, financial services, hospitality, construction, engineering and industrial segments.

Top small caps

If we consider the larger firms within the small caps where FIIs cut their stake last quarter, Strides Pharma is at the top of the heap.

Other larger companies in the small-cap space with market value upwards of $500 million that saw offshore investors turn bearish include Deepak Fertilisers, Shilpa Medicare, Karur Vysya Bank, Varroc Engineering, Lemon Tree Hotels, Equitas Holdings, Mahindra Lifespace, Esab India, Minda Corporation, GHCL, Newgen Software, Vakrangee and Somany Ceramics.

Significant sale by FIIs in small-cap pool

If we track stocks where FIIs or FPIs were particularly bearish and sold 2% or more stake last quarter we get around 30 names.

These include companies like Antony Waste, Kirloskar Industries, Intrasoft, Artemis Electricals, International Conveyors, Capacit’e Infraprojects, Ador Fontech, Ujjivan Small Finance Bank, Jai Corp, Rollatainers, Esab India, Kolte-Patil, Shemaroo Entertainment and Arvind.

Among other small caps that saw bearish sentiment by FPIs were Usha Martin Education, Welspun Corp, Veto Switchgears, Wonderla Holidays, Zee Media Corp, CARE Ratings, Shilpa Medicare, IOL Chemicals, Gabriel India, Gayatri Projects, Ahlada Engineers, Karur Vysya Bank, Lemon Tree Hotels, Nucleus Software, Newgen Software and Sadbhav Infra.