FPI dollars succumbing to the irresistible small and midcap charm
FPI holdings in Indian stocks reached their lowest level in a decade at 16.6%, according to a research report by ICICI Securities.
Smallcap and midcap stocks have outperformed largecap stocks this year and on a 12-month basis. According to Trendlyne data, the Nifty Smallcap 100 index has advanced 39% on a year-to-date basis and nearly 43% in the last year, while returns by Nifty Midcap 100 are around 28% and 35%, respectively.
FPIs are traditionally less inclined towards small and midcap stocks compared to largecap peers, the report said.
On the other hand, largecaps have been at the receiving end of this trend, having witnessed a dip in their FPI holdings.
Nifty50 stocks have gained 8% on YTD and 12-month basis.
The downtick in FPI holding in September and October was at Rs 2,273 crore and Rs 2,657 crore, respectively, and was despite domestic fundamentals approaching their historical best, ICICI Securities said in its report, referring to the situation as “ironic”.
The brokerage has come to this conclusion after analysing the shareholding pattern of listed companies from their corporate filing data.
The worst hit has been the financial sector, where large selling trends were observed in October even as the FPIs preferred buying industrials. The outflows have been prevalent in IT & Hardware, energy, power, FMCG, consumer discretionary, healthcare, and realty, while inflows in telecom and construction material, the report highlighted.
