FIIs and DIIs are bullish on these five stocks. But should you buy them?

The gap between FII and DII holdings narrowed to an all-time low in the March quarter, with DIIs’ holdings just 9.2% below those of FIIs. Photo: Mint
The gap between FII and DII holdings narrowed to an all-time low in the March quarter, with DIIs’ holdings just 9.2% below those of FIIs. Photo: Mint

Summary

  • FIIs' stakes in NSE-listed companies fell to an 11-year low in the March quarter, but some firms attracted significant foreign and domestic inflows. Here are five such companies, and the reasons why it's never a good idea to blindly copy institutional investors.

Foreign institutional investors’ (FIIs’) stakes in NSE-listed companies declined significantly in the previous quarter, hitting an 11-year low of 17.7%. This 0.5% drop from 18.2% in the previous quarter highlights a shift in investor sentiment.

Domestic Institutional Investors (DIIs) bucked this trend, though, with net inflows of 1 trillion, taking their shareholding to a record high of 16.1% in March. This increase, from 15.9% in December, narrowed the gap between FII and DII holdings to an all-time low. DIIs’ holdings are now just 9.2% below those of FIIs.

A select group of companies also defied the FII selling trend, attracting significant foreign inflows. Here are five such firms.

#1 Pricol

Pricol is the world's second-largest maker ofdriver information systems for two-wheelers, with a market share of more than 50% in India. It is also the fourth-largest firm of its kind worldwide in the commercial-vehicles (CVs) and offroad-vehicles segment, with a market share of more than 70% in driver information systems for CVs.

The latest shareholding figures for Pricol indicate a notable uptick in FII ownership, up from 6.5% in the December quarter to 14.4% in the March quarter, reflecting a substantial increase of 7.9%. DIIs increased their stake by 9.7% – from 6.9% in the December quarter to 16.6% in the March quarter.

This could be because Pricol is making strong inroads in the electric-vehicle segment and making itself future-ready through collaborations with startups. It is also the sole supplier to TVS for its iQUBE electric scooter.

To deepen its presence in the EV space,the company has signed an international licensing agreement with BMSPowerSafeto manufacture and sell a battery management system (BMS) for the Indian market.

Through this partnership, Pricol will licence the product and technology from BMS PowerSafe and manufacture it in-house.Thiswill allow the company to offer a pure-play EV product.

The management said in a recent conference call thatgrowth was affected by lower production of EVs and deferment of schedules owing to the FAME subsidy issue. Going forward, the company is targeting at least 20% growth over the next three to four years.

Pricol stock

Source: BSE
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Source: BSE

#2 PSP Projects

PSP Projects offers various services for construction projects in India. It caters tosegments such as industrial, institutional, government and residential, and is known for its timely execution and ability to bid for high-value projects.

The most recent shareholding data for PSP Projects shows a significant 4.3% increase in FIIs’ stake, from 2.3% in the December quarter to 6.6% in the March quarter. DIIs increased their stake by 4.2%, from 4.6% in the December quarter to 9.2% in the March quarter..

This surge in investor interest could be due to the company's consecutive order wins.In January, PSP Projects was the lowest bidder for a dairy plant development project in Rajkot, Gujarat, valued at nearly 4.5 billion.On 15 February, it secured another order worth 6.3 billion in Gujarat for the construction of aGati Shakti Vishwavidhyalaya at Vadodara for Rail Vikas Nigam. This project is expected to be completed in two-and-a-half years.

The Ahmedabad-based firm previously expected to have earned revenue of 25-26 billion in FY24 and had targeted 30 billion in FY25. Recently, though, it said it was confident of surpassing 30 billion in revenue in FY24 and would set a target of 36 billion for FY25.

PSP Projects stock

Source: BSE
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Source: BSE

#3 Aavas Financiers

The company provides housing loans to customers in the low-income, middle-income and self-employed segments in suburban and rural India.

The latest shareholding pattern of Aavas Financiers reveals a notable increase in FIIs’ stake, which rose 2.5% from 32.3% in the December quarter to 34.8% in the March quarter.

DIIs increased their stake by a substantial 8.7%, from 15.3% in the December quarter to 24% in the March quarter.

This increase in investor interest could be attributed to the company's robust performance in the December quarter. Aavas Financiers reported a 23.5% year-on-year (yoy) increase in revenue to 5.1 billion, with net profit rising 8.95% to 1.2 billion.

The company also has as trong long-term outlook, with loan grow expected to improve once its technology rollout is complete.

The company is also looking to diversify its loan-sourcing channels by connecting with local sourcing ecosystems rather than relying on direct sourcing channels, and plans to increase the number of branches by 10%. It has also already tied upwith e-mitra, the Rajasthan government's network, to offer various services. 

The company is targeting loan growth at the top end of its 20-25% guidance.

Aavas Financiers stock

Source: BSE
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Source: BSE

#4 Tips Industries

The company produces and distributes motion pictures, and acquires and monetises music rights.

Its latest shareholding pattern reveals a 1.2% uptick in FII ownership, from 0.9% in the December quarter to 2.1% in the March quarter. DIIs increased their stake by 7.3%, from 0.9% in the December quarter to 8.2% in the March quarter.

This could be due to the company's robust performance in the December quarter. Despite facing stiffer competition in the content-acquisition market, Tips achieved 27% growth in revenue while profits surged by 72%. The board declared an interim dividend of 3 per share.

The company recently announced a programme to buy back 0.6 million equity shares for 625 each ( 372 million in total), a significant premium over the current market price of 500. 

Warner Music has also extended its partnership with Tips Industries for another four years. The company will focus on acquiring more content from external sources to drive future growth.

Tips Industries stock

Source: BSE
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Source: BSE

#5 Dixon Technologies

Dixon Technologies is a multinational electronics manufacturing and services company that offers design-focused solutions in consumer durables, home appliances, lighting, mobile phones and security devices.

Its strength is in large-scale, cost-effective manufacturing, which has the potential to drive wider adoption of photonics-based products such as lasers, cameras and sensors in India.

Recent shareholding data reveals a 0.5% rise in FII ownership, from 17.4% in the December quarter to 17.9% in the March quarter. DIIs increased their stake by 0.6%, from 26.4% in the December quarter to 27% in the March quarter.

Several factors could be responsible for this. First, Dixon Technologies saw its revenue from operations double to 48.2 billion, driven by increased demand for smartphones in India, which bolstered its mobile and electronics manufacturing business.

The company reported impressive 86% growth in the December quarter, benefiting from surging demand for electronic gadgets and the rapid expansion of electronics manufacturing in India.

Dixon Technologies has renewed its focus on the government’s production-linked incentive (PLI) scheme for the mobile manufacturing sector and proposed the introduction of a fresh PLI for electronic components.

The company recently signed a share purchase agreement with Ismartu Pte Ltd, aiming to acquire up to 56% equity in the latter in two tranches. This strategic move aligns with Dixon's expansion goals in the segment.

The company now plans to expand its product range to position itself for continued growth in electronics manufacturing.

Dixon Technologies stock

Source: BSE
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Source: BSE

Conclusion

FII and DII buying activity might be tempting to imitate as their huge research teams and access to information could help uncover strong fundamentals or growth potential.

However, it's important to remember that their investment strategies may not align with your own financial goals, risk tolerance, or investment horizon.

FIIs and DIIs often have different objectives, time frames, and risk appetitesthan individual investors. They could be investing for short-term gains, long-term growth, or to meet specific portfolio requirements.

Also, by the time FII and DII investments are publicly disclosed, the stock price may already have moved, potentially reducing the upside potential and increasing the risk.

Therefore, you should conduct your own research to ensure the company aligns with your investment goals and risk tolerance.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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