FIIs reduce stakes in over 200 firms in NSE500 index in Q2! 32 companies saw 2-12% fall in stakes

Foreign institutional investors (FIIs), who remained the net sellers in the September quarter pulling out more than Rs 25000 crore in the cash segment of the Indian equity markets, reduced their stakes in over 200 companies in the NSE500 index in the same period.

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FIIs reduced stakes in as many as 222 companies so far in the September quarter (Q2) in the NSE500 index, according to data collated from StockEdge, and 32 companies saw a fall of 2-12 percent in the same period.

Analysts attribute the fall in stakes to profit booking and sectoral rotation in the FII portfolio. Selling by foreign investors is not limited to India, but most of the Asian countries also saw a similar trend, they said.

“FIIs have remained the net sellers for about Rs 8000 crore in the last two weeks. This can be seen as the case of profit booking, rising valuations of stocks, and concern on tapering of liquidity as the US Federal Reserve has hinted a rate hike,” Manoj Dalmia, Founder & Director, Proficient Equities Private Limited, said.

“Globally, foreign portfolio investment (FPI) inflows of USD 617 million, USD 38 million, and USD 679 million were in Indonesia, Philippines, and Thailand, respectively . FPI outflows of USD 2,956 million and USD 2,472 were in Taiwan and South Korea, respectively,” he said.

“Transferring money from these cash cows to other undervalued business. As we see, FIIs were the net buyers in financial services indicating sectoral shifts,” highlights Dalmia.

Companies that saw more than 5 per cent cut in the FII stakes, include names like Jubilant Ingrevia (up over 100% in 2021), Shriram Transport (up 42% YTD, 109% in 1 year), Indiabulls Housing Finance (down nearly 5% in YTD), and JustDial (up 27% YTD).

“There is a possibility of shifting probable reason being that there is a downfall in the Nifty and the Nifty 500. But, on other side, the Banking index and the PSU bank have also outperformed,” Ravi Singhal, Vice- Chairman, GCL Securities Limited, said.

What should investors do?

If FIIs are reducing stakes in the NSE500 companies, it should not be a warning sign, instead one should keep the list as a reference, and research for probable reasons of selloff.

Apart from what FIIs are doing in their quarterly sectoral churn, investors should not blindly follow the institutional investors.

“Investors should not blindly follow FII in this market, as there are many other factors also considered such as valuations, growth, business environment, government policy, etc.,” said Singhal of GCL Securities Limited.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)