Foreign Institutional Investors (FII)
The sell-off in small-cap stocks observed in March, triggered by negative remarks from Sebi, has proven to be a minor setback, with small-cap indices quickly rebounding to achieve record highs once more. Despite concerns among investors regarding inflated valuations, data indicates that in the March quarter, both Foreign Institutional Investors (FIIs) and mutual funds increased their holdings in at least 213 small-cap stocks.
Analysis of the shareholding patterns reveals that while FIIs disregarded valuation concerns and raised their stakes in 56% of the stocks within the BSE Smallcap index, which comprises 1000 stocks, mutual funds displayed bullish sentiment towards 40% of the counters.
Among these, both parties increased their holdings in 213 companies, including Lemon Tree Hotels, Reliance Power, Pricol, Suzlon Energy, SpiceJet, Cochin Shipyard, Olectra Greentech, GRSE, Mastek, and Tejas Networks.
Two of these stocks, Transformers & Rectifiers (up 199%) and Puravankara (up 102%), have seen their value more than double in the current calendar year. Other notable top performers include Motilal Oswal Financial (up 90%), Cochin Shipyard (up 88%), Sobha (up 75%), Tata Investment Corporation (up 58%), and Shipping Corporation Of India (up 36%).
During a period of profit booking, regulatory apprehensions regarding market exuberance, and stress tests conducted by mutual funds, 63% of mid-cap and 70% of small-cap stocks experienced negative returns in February and March. Conversely, two-thirds of large-cap stocks generated positive returns during this timeframe.
However, in April, small-cap stocks staged a comeback, reclaiming lost ground as their indices surged to new highs.
