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FIIs’ Equity Holdings in Smallcap Firms Soars 20-Quarter High

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According to Prime Database data, Foreign institutional investors (FIIs) plunged stakes in India’s smallcap firms to their highest level in at least five years as holdings in large-cap and midcap showed declined.

Flookooks to earn alpha as they increased their holdings in select smallcap firms in the March quarter.

A total of 41, or 54%, of these 76 companies witnessed FII stakes rising in the March quarter. FIIs rose their stake the most by 9.6% points in Jindal Stainless Ltd to 22.82%.

Other companies raising stakes by more than 1% points were Indian Energy Exchange, Aegis Logistics Ltd, Cyient, Birla Corp Ltd, Exide Industries, Mahanagar Gas and City Union Bank.

Besides, FIIs cut their stake by 11.47% points in PVR to 32.29%. The other companies cutting stakes by at least 1% were RBL Bank, Quess Corp, Amber Enterprises India, JK Lakshmi Cement, Central Depository Services India, Suzlon Energy and IDFC Ltd.

Meanwhile, domestic institutional investors (DIIs) increased their stakes in these companies slightly from 5.8% to 5.9%, while promoters continued to reduce their stakes.

This study considers only stocks of companies that have published their ownership patterns for the March quarter and for which comparable data are available for 20 quarters.

Analysts said the recent increase in buying by smallcap companies can be attributed to the remarkable resilience shown by Sensex and Nifty benchmarks over the past 18 months. While these indices have remained relatively stable, hovering around 10-20% below their all-time highs (excluding IT services companies), mid-cap and smallcap stocks have fallen even more. As a result, these segments now appear more attractive from a value perspective, according to analysts.

For Nifty 500 stocks, FII holdings as a percentage of total holdings fell to 14.26% from 14.45% a quarter earlier, while for Nifty MidCap 100 stocks, their holdings in the March quarter fell from 11.72% in the previous quarter down to 10.66%.

DII’s stake in Nifty 500 companies rose to 18.18% from 15.77%, while its stake in Nifty Mid-Cap 100 companies rose to 23.74% from 16.86% in Q3 2023.

Meanwhile, promoters’ stakes in the Nifty 500, mid-cap and smallcap fell to 52.9%, 49.17% and 68.05%, respectively, from 54.66%, 53.48% and 69.88% a quarter earlier.

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