Foreign institutional investors (FIIs) in the Indian equity market invested Rs 1.7 lakh crore in FY 2020 but reduced their stake in several 40 largecap companies on a quarterly basis in the December quarter.
In this list, we have included companies whose market cap as on 25 January 2021 was more than Rs 20,000 crore.
FIIs reduced their stake in about 45 companies in the December quarter. These include stocks such as TCS, RIL, Avenue Supermarts, Sun Pharma, Bajaj Auto, ONGC, IOC, and Dr Reddy’s Laboratories and Tata Motors.
Among the companies in which FIIs have reduced their stake include the top bluechip companies as well as their sector leaders. The data shows that many of these are stocks that are looking somewhat lighter than their peak, but experts Says that there is no need to worry about it.
The sale of FIIs in top lodgecap companies could be an indication of whether they are re-balancing their portfolios or are making some profit booking at higher levels.
The list of such stocks includes the names of those stocks that are already trading at their new 52-week highs. In this situation, if someone has such a largecap stock, then he can remain in this stock because his long term outlook is still strong.
Likhita Chepa of CapitalVia Global Research told Moneycontrol that reducing FII stake in these largecap stocks could be part of their rebalancing strategy. Some of these stocks belong to high-beta sectors whose valuations have been high. He further said that the FII shareholding strategy could also be for some profit realization as shares like IFB Industries Ltd, Laurus Labs Ltd and Adani Enterprises Ltd have so far given over 200 per cent returns.
Likhita Chepa further said that the reasons behind the reduction in FII share may vary from stock to stock. Therefore, investors are advised to gather stock specific information before investing in any of these shares and take investment decisions only on that basis.
What are investment strategies?
FII holding in a share or shares cannot be made the standard for investment. Experts recommend taking care of your risk profile while choosing stock for investment. When deciding on the purchase and sale of shares, keep in mind both technical and fundamental parameters.
Monitor the cash flow, EPS, PEG ratio, leverage on books, revenue growth and capital expenditure offered by the company under the Fundamental Standard.
The reasons for buying, holding or selling a stock depend on the investors. An investor should make investment decisions based on his financial position, risk appetite and portfolio position. Investors should also keep in mind some technical parameters while investing and decide to buy or sell based on them. The position and direction of any share in these parameters based on their 50, 100 and 200 DM should also be taken into consideration.
Kavalireddi of FYERS says that a trader or positional investor can use the 50-day moving average to enter a stock for short term. Similarly 100/200-day moving averages should be used to invest for the medium term. There are a few more parameters to be considered for the investment decision, including the price trade of the stock on the Weekly and Daily Time frame charts. Although these parameters are not a guarantee of return on your investment, they help in understanding the market sentiment and market situation.