Betting on small-caps? Check out the stocks where FIIs increased stake

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

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

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 that can become mid-cap or large-cap over the medium to long term.

We dived into the data for last quarter and spotted around 100 small-cap stocks where FIIs or FPIs increased their stake in the quarter ended September 30.

Top small caps

If we consider the larger firms within the small cap space where FIIs increased their stake last quarter, Mahindra Holidays is at the top of the heap.

The time-sharing hospitality venture of the Mahindra Group, which was hit by the Covid-19 pandemic last year, added two more FPI shareholders last quarter whose combined holding inched up to 5.32% from 4.45%.

Among those who bought shares of the company include the Norwegian sovereign fund Government Pension Fund Global, which pushed up its holding to 2.62% last quarter.

Other larger small-cap stocks that attracted offshore investors include Solara Active Pharma, HG Infra Engineering, Reliance Power, India Pesticides and Uflex.

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 around two dozen names.

These include India Pesticides, Jindal Saw, Dhanuka Agritech, Dodla Dairy, Globus Spirits, Stove Kraft, Dish TV, Matrimony.com, Ujjivan Financial, Kiri Industries, Ashiana Housing and Suryoday Small Finance Bank.

Other small caps where FIIs were bullish included Shaily Engineering, Gokaldas Exports, Karda Constructions, Deccan Cements, Inox Wind Energy, Xelpmoc Design, Hind Rectifiers, Websol Energy, Abans Enterprises, Vikas Ecotech, Ashika Credit, Advik Capital and New Light Apparels.