FIIs were less bullish on small-caps last quarter. Here’s what they bought

The Indian bourses had scaled new highs last October and tested the levels a month ago, only to see a reversal since then over fears of monetary tightening and the war in Ukraine. But markets are now consolidating around 5% below the peak level.

Foreign portfolio investors (FPIs) or foreign institutional investors (FIIs) have become more cautious about investing in India but quarterly shareholding data shows they pushed up their holding in over 200 listed companies.

Among the 200-odd stocks, around 121 are small-caps with current market valuation of under Rs 5,000 crore. This is less than the preceding quarter when they bought additional shares of 143 small caps, but is still higher than the quarter ended September 30, 2021 when they hiked stake in around 100 small-cap stocks.

This reveals an interesting aspect where FIIs upped stake in more large-caps and mid-caps but pushed up their stake in fewer small caps compared to the preceding quarter. This is a total reverse pattern of the previous quarter when they had behaved exactly the opposite way in the three months ended December 31, 2021.

The small-cap segment tends to have a high beta and tends to swing much more in a volatile market condition.

Many offshore investors 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 large cap over the medium to long term.

Top small caps

If we consider the larger firms within the small caps where FIIs increased their stake last quarter, at the top of the heap is Jindal Poly Films. Ltd. Among others in the pack with market valuation of $500 million or more, there are names like Jaiprakash Power Ventures, Gujarat Mineral Development, Johnson Controls, FDC, Aarti Drugs and Gujarat Pipavav Port.

Lower down the order are companies like Hikal, Astec Lifesciences, Engineers India, Apcotex Industries, Cosmo Films, Bannari Amman Sugars, Hathway Cable & Datacom, Dalmia Bharat Sugar, Himadri Speciality Chem and JK Tyre & Industries.

Significant picks by FIIs in small-cap pool

If we track stocks where FIIs or FPIs were particularly stoked and bought 2% or more additional stake last quarter, we get eight names. This is just a shade lower than nine companies in the previous quarter.

These companies were Kiri Industries, Celebrity Fashions, Electrosteel Casting, Dwarikesh Sugar, Dhampur Sugar Mills, CARE Ratings, AGI Greenpac and Everest Industries.