Stock Fundamentals

What big guys are buying and selling

Bavadharini KS | Updated on February 06, 2021

Studying patterns in institutional holdings in a stock can be a starting point for your research

Though the stock markets crashed in March last year, it soared to an all-time high by the end of December 2020. Institutional investors, both foreign and domestic, are big market drivers and most retail investors tend to take cues from the institutional investmentsfor their equity holdings. While this strategy may have a downside in terms of small investors entering when the big guys might exit, the upside is that institutional interest gives retail investors confidence about the company’s credentials and prospects.

Studying patterns in institutional holdings can be a starting point for you to do more research about a stock before you take exposure.. So, what stocks have institutions preferred or shelved between March and December 2020? Here is an analysis based on BSE 200 Index constituents (where December 2020 shareholding pattern is available for all companies).


FIIs bullish, MFs shed stake

Both FIIs and MFs have to disclose their portfolios every month, which throws light on the stocks bought and sold during the month. Alternatively, an investor can check the shareholding pattern of individual companies, which is usually available in the website of the stock exchange to understand where institutional investors have moved their money. Among the institutional investors, foreign institutional investors (FIIs) have been optimistic and have steadily increased their holdings. From 20 per cent in March 2020, FII holdings in BSE 200 Index stocks have gone up to 22 per cent in December in the same year. They have bought into 114 stocks out of 200 stocks, of which 78 stocks (almost 70 per cent) are from the large-cap category. FIIs have increased their stake consistently from 13.1 per cent in March 2020 to 35.2 per cent in December 2020 in Bandhan Bank. Similarly in Jubilant Foodworks, FII holdings went up from 30.9 per cent to 39.4 per cent during the same period.

Mutual funds, on the other hand, have been shedding stake. From 8 per cent in March 2020, overall MF holdings in BSE 200 stocks came down to 7.9 per cent in June then to 7.8 per cent (in September) and in December quarter it stands at 7.5 per cent. MFs checked out of large-caps and took a liking for mid-caps in this period.

Of the 200 stocks in BSE 200 Index, MFs offloaded their stake in 124 stocks, of which 64 per cent were large-cap stocks. Profit-booking as the indices soared and valuations expanded could be the main reason. Equity mutual funds as a category have been seeing net outflows every month since July 2020 as investors logged out of them. MFs have sold their stakes in large-cap companies mostly from banks and financial services, pharmaceuticals and auto and auto components sectors. The top stocks from these sectors, where they shed stake, include RBL Bank, Axis Bank, M&M Finance, Bajaj Fin Serv, Eicher Motors, Exide Industries, Aurobindo Pharma, and Ipca Laboratories,

Liking for mid-caps

MFs have increased their stake in 76 of the BSE 200 stocks, mostly in the mid-cap category. In many of the sectors in which they shed stake in large-cap stocks, they have increased holdings in mid-caps. For instance, to ride on the recovery in IT sectors, MFs have taken to mid-cap IT stocks such as Mphasis, increasing their holdings from 6.8 per cent in March last year to 11.4 per cent in December 2020.

In auto/auto components sector too similar trend was witnessed. For instance, MFs have increased their stake in Endurance Technologies from 5.7 per cent in March to 9.3 per cent in December last year.

Ashok Leyland too saw increase in stake during the same period, up from 9.7 per cent to 10.9 per cent.

Published on February 06, 2021

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