Six of these stocks in which MF and FII ownership went up regularly from June 2023 till March 2024 have, in fact, given multibagger returns of up to 203% in the last one year, shows data pulled from ACE Equity.
In the case of contract manufacturer Dixon Technologies, MF ownership has gone up from 11.99% to 18.39% in one year while FIIs have also raised bets from 12.04% to 17.85% during the period. The stock, as a result, is up 203% in just one year.
The other five multibagger stocks in the list are Electronics Mart India, Welspun Corp, Bharat Bijlee, HEG and Star Cement. Other stocks like Ion Exchange, Mastek and BASF India have given a return of at least 50% in the last one year while Pfizer and Timken India underperformed.
Sumitomo Chemical India is the only smallcap stock in which both the big boys were bullish but gave a negative return of 0.44% in one year.
In the March quarter, FIIs were seen increasing stake in 56% of stocks in BSE Smallcap index, which has 1,000 counters, while mutual funds were bullish on 40% of the counters.
What should investors do?
After a brief pause last month, smallcaps are now back in momentum once again. The BSE Smallcap index ended last week 4% higher after hitting a fresh all-time high on Friday. The BSE SME IPO index soared over 10%.
While one needs to be selective in sectors and businesses, analysts say the market could be at the starting point of a pre-election rally now.
“There is so much liquidity waiting on the sidelines. The earning season has started. Look at the guidance given by some of the management and also the regular business updates which start during the start of the quarter. Things mostly seem to be hunky-dory. Look at the GST collections or macros, other macros, PMI data,” says Devang Mehta of Spark Private Wealth.
However, while picking smallcaps investors must be careful of the over-exuberance seen in pockets as trees don’t grow to the sky.
“Please do not try to maximise your return every single day. I think the rotation among sectors and stocks is crazy. It is very difficult to keep pace. And more often than not, we get sucked into buying something after the prices have already moved up much beyond fair value,” warns Dalal Street and fund manager Sunil Singhania.
Smaller companies, he said, will always have potential to grow faster because they are nimble and they are in segments where the growth rate naturally is much higher than the matured segments in which the larger companies would operate.
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)