An analysis of shareholding pattern of BSE-listed companies shows that foreign investors upped their stake in at least 95 smallcaps that have given multibagger returns this FY24.
During the quarter, FIIs raised their stake in at least 529 stocks, out of which a vast majority of 496 counters have given positive returns in the fiscal year and 95 have more than doubled investor wealth, shows ACE Equity data.
At the end of the June quarter, FIIs owned just 0.09% stake in Jai Balaji Industries but increased it to 0.67% in Q2. The smallcap iron and steel stock, which has a market capitalisation of around Rs 9,000 crore, has seen its share price going up 1,143% in FY24 to make it among the best performing smallcap in FII portfolio.
Suzlon Energy, which is a favourite of both retail as well as foreign investors and has given 287% return on the back of multiple tailwinds and turnaround in balance sheet, saw FIIs increasing stake by 309 bps to 10.88%.
Other notable stocks in which FIIs raised their ownership include Jupiter Wagons, Apollo Micro Systems, Aurionpro Solutions, D.B. Corp, ITI, Mazagon Dock Shipbuilders, Titagarh Rail Systems, Newgen Software Technologies, Inox Wind, RVNL, Zen Technologies, Railtel Corporation, Birlasoft, Apar Industries and Cochin Shipyard.
Titagarh Rail Systems, which is a play on surging railway capex, saw FIIs more than doubling their holding from 7.05% in Q1 to 16.85% in Q2. The company, whose shares have rallied over 190%, reported 54% YoY jump in Q2 revenue and 106% YoY jump in adjusted PAT.
“We are raising the target P/E to 33x (from 30x) and FY24E/25E EPS by 5%/4%. This, along with a rollover to Q2FY26E yields a revised target price of Rs 949,” Nuvama said.
Zen Technologies, which designs, develops and manufactures state-of-the-art combat training solutions for the training of defence and security forces worldwide, has also doubled investor wealth. FIIs raised stake by 137 bps to 4.84%. Given the large order inflow and revenue visibility for next few years, analysts feel that some more rerating is possible.
What should investors do?
In the last one year, Nifty has delivered 7.6% return while Nifty Smallcap 250 and Nifty Midcap 100 index have delivered 28.3% and 26% returns, respectively, with capital goods, auto and metals being top winners.
Following the 3% correction seen in October, the valuation model used by Kotak Equities shows that the index is ‘only’ 8% overvalued now, compared to 10% at the end of September.
“The current geopolitical tensions may just be the trigger that can lead to the index becoming fairly valued. They have already brought the median pairwise correlations close to their long-term average, and a slight increase in the index volatility. There were also marginal cuts to the EPS estimates in October,” Kotak analyst Anurag Singh said.
In the ongoing quarterly earnings season, there have been no major negative surprises nor any major positives.
“Overall within our coverage universe, the upgrades for FY24E / FY25E earnings have been driven by cyclicals related to capex, discretionary consumption, and credit growth (Ultratech, ACC, JSW Steel, Voltamp, Polycab, Maruti, Bajaj Auto, Kewal Kiran, IndusInd Bank, PNB Housing, etc.). Earnings estimate downgrades are largely due to defensive sectors (IT, FMCG, grocery retail) along with cyclicals related to QSRs, retail, building materials, rural finance, RIL, etc,” said Vinod Karki of ICICI Securities.
(Data inputs: Ritesh Presswala)
(You can now subscribe to our ETMarkets WhatsApp channel)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)