Markets

Bullish bets of MFs, FPIs pump up select stocks

Suresh P Iyengar Mumbai | Updated on September 13, 2021

For MFs, the sharp increase has come in the mid- and small-cap stocks

The relentless inflow into the equity schemes of mutual funds and calculated bets of foreign portfolio investors have been driving select stocks to dizzying heights.

Stock prices rise

In fact, an increase of 1.03 per cent to 7.59 per cent by mutual funds in 48 stocks, has pushed up prices between 20 per cent to 133 per cent between March-end and September 3.

Interestingly, the sharp increase has come in the mid- and small-cap stocks.

For instance, Lux Industries stock zoomed to ₹4,071 from ₹1,748 between March-end and September 3. Mutual funds have increased their holding in the company to 6.44 per cent from 4.77 per cent.

Triveni Engineering, which is part of BSE Small cap index, has more than doubled to ₹174 from ₹85 as mutual funds marked up their holding from 3.98 per cent to 5.15 per cent in the June quarter, according to an LKP Securities study, ‘Bullish Bets of Large Stakeholders’.

Similarly, the stock price of Thangamayil Jewellery, Max Healthcare Institute, CDSL, Century Textiles, Mindtree and Coforge, have increased 88 per cent to 79 per cent as fund houses’ stake increased 1.33 per cent to 3.07 per cent.

Raise stake

Foreign Portfolio Investors, who have been booking profit at regular intervals, have also aided 70 stocks to rally between 210 per cent to 21 per cent, with Nelco shares gaining the most to ₹585 from ₹189 in the last six months.

FPIs have raised their stakes in 40 companies between 1.02 per cent (Macpower CNC Machines) to 7.06 per cent (5paise Capital).

Datamatics Global Services, Nitin Spinners and Intense Technologies are some of the top beneficiaries of bullish bets of FPIs.

Insurance companies’ investment in equities increased the share prices of 38 companies between 2 per cent and 79 per cent in the last two quarters.

S Ranganathan, Head of Research, LKP Securities, said mutual funds garnered 60 per cent returns in just five months from the top 18 companies where they have increased stake, while top 25 companies returned 70 per cent to FPIs.

Investment plan

Inflow through monthly systematic investment plan increased 17 per cent in the first six months of this fiscal to ₹56,026 crore against ₹47,827 crore in the same period last year.

Anecdotal evidence proves that about 90 per cent of SIP inflows are in equity schemes. Domestic Institutional Investors have been sustained buyers, pumping in ₹45,756 crore this fiscal till August, while FPIs have pulled out ₹4,623 crore from India in the first five months of this fiscal, and have invested ₹4,385 crore so far in September.

Valuations

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said FPIs are sceptical about valuations and are reluctant to commit to increasing funds, but they are restrained from turning aggressive sellers by the market momentum.

Flush with funds, domestic institutions have been consistent buyers in equities as they have no other option, he added

Retail investors are driving the market unmindful of valuations even as aggressive buying at this level is not advisable. Investors can book profit partially and move some money to fixed income, he said.

Published on September 12, 2021

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