Nearly 3 in every 5 companies where promoters hiked their stake in the June quarter have outperformed BSE 500 in the last 5 months. Retail investors haven’t done too badly either. Surprisingly, the performance of stocks wherein Foreign Portfolio Investors (FPI) hiked their stake has been subdued in comparison. But will they have the last laugh?FPIs have been betting big on companies relying on consumption and healthcare spends. They have also hiked their stake across the spectrum of financial services, which include private sector banks, insurance companies, NBFCs, exchanges and asset managers. To play the theme of digital India, Atma Nirbhar Bharat and infrastructure development, they have relied on the frontliners.
Apart from the ones included in the list above, FPIs also raised their stake in companies such as Dixon Technologies, Mahindra Logistics, Bharat Forge, Granules and Thyrocare Technologies to name a few.Many companies that have seen the maximum increase in the promoter shareholding have struggled in the past. Some of them have even faced corporate governance issues. Non-institutional holding has increased in beaten down companies as investors seem to have preferred low-priced stocks.
Buying a stock just because its promoter has hiked the stake in the company is a bad idea. While promoter’s activity can offer you great cues about a company’s operations, promoters don’t always increase their holding when they are bullish on their businesses. In fact, many a time they raise stake to support the sliding stock prices.
Although FPIs have been termed as migrating birds, they have shown more trust in India’s growth story than domestic investors have. Going by the changes in the shareholding pattern of BSE 500 companies it appears that, FPIs have been betting big on companies that are expected to be the beneficiaries of favourable demographics, urbanization, thrust on domestic manufacturing and a massive potential in the e-commerce space. They haven’t shied away from investing in richly valued companies.
That said, copying FPIs comes at its own cost. Usually, Indian markets are one of the many choices available to overseas investors. For them, India is a part of their global portfolio allocation strategy. Attractiveness of Indian markets is always juxtaposed with that of other emerging markets to determine the overweight and underweight positions. Therefore, individual investors are often better off doing the independent evaluation of a company they want to invest in. Buying low-priced or beaten down stocks isn’t a bargain always.
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We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflicts of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.