Key facts
- Foreign institutional investors have sold Rs 5.5 lakh crore of Indian equities since September 2024.
- FIIs have increased their stakes in 84 specific stocks that have delivered multibagger returns over the past two years.
- Midwest Energy saw a 19,859% return with FII stake rising from zero to over 12%.
- GE Vernova T&D India saw FII holding surge from 6.82% to 20.39% with a 216% return.
- Experts highlight India's long-term growth potential with an 11%+ nominal GDP growth construct.
- Analysts advise accumulating stocks now, anticipating market gains before FIIs return, contingent on earnings visibility.
Foreign institutional investors (FIIs) have divested a substantial Rs 5.5 lakh crore from the Indian stock market since September 2024, with a particular focus on selling heavyweight banking and financial stocks. However, a contrasting trend reveals that FIIs have simultaneously increased their holdings in 84 specific mid- and small-cap stocks that have delivered multibagger returns over the past two years.
Among these outperformers, Midwest Energy stands out with a remarkable 19,859% two-year return and a significant FII stake increase from zero to over 12%. Other notable companies where FIIs have built positions from scratch include Sumeet Industries (6,376% return), CIAN Agro (over 3,000% return), and Colab Platforms (over 2,200% return). In more widely-tracked names, GE Vernova T&D India saw its FII holding surge by over 13.57 percentage points to 20.39% alongside a 216% return. Similar patterns of rising FII stakes were observed in Hitachi Energy India (217% return), TD Power Systems (220% return), MTAR Technologies (254% return), Sterlite Tech (339% return), Apollo Micro Systems (270% return), Sky Gold (304% return), Wockhardt (225% return), Aeroflex Industries (185% return), and Paras Defence And Space Technologies (121% return).
This divergence raises questions about the broader narrative of FII selling. Experts like Sailesh Raj Bhan, Equity CIO at Nippon India Mutual Fund, suggest that FII selling has been a long-term trend without causing market collapse, attributing India's resilience to its "longevity of growth" and an "11%+ compounding nominal GDP growth construct." Bhan advises investors to accumulate stocks, anticipating market appreciation before FIIs return, driven by earnings visibility, which he notes is currently low due to elevated oil costs. He also points out that valuations have already de-rated from 20-22x P/E to 18x.
Amish Shah, India MD and Head of Research at BofA Securities, proposes a sector-wise strategy, favoring beaten-down large private and PSU banks, consumer discretionary themes like jewelry and travel, and data-centre-linked plays. He also highlights policy bets in energy security, biofuels, electrification, and shipbuilding, where India is poised to gain market share. Morgan Stanley's Ridham Desai anticipates an earnings upcycle, driven by increased investments in energy, defense, semiconductors, fertilizers, and data centers, with an overweight stance on financials, consumer discretionary, and industrials.