FIIs increase stakes in private banks, and a fintech player in Q3FY23

The Indian stock market witnesses a huge inflow of foreign funds commonly known as FIIs (Foreign Institutional Investors). Till a few years ago the FIIs were responsible for huge price swings in the stock market. However, now this has changed, and domestic institutions have become stronger and are able to absorb the quantity sold by these FIIs. That said, the FIIs still play an important role and their increasing stakes in any stocks is a signal to retail investors that the FIIs have a long-term outlook on a sector or a specific stock.

Going by the data on what FIIs have bought in Q3FY23, the highest change can be seen in Redington, an end-to-end supply chain solution provider for IT in the enterprise as well as consumer segments. It is also the authorised distributor of iPhones in India and many other countries. From 37.94% in Q2FY23, FIIs now own 60.78% of this stock.
One sector which saw buying from FIIs was private banks. FIIs have upped their stakes in Axis Bank and Yes Bank. During the quarter, FIIs nearly doubled their shareholding in retail favourite Yes Bank from 12.15% to 23.24%. Yes Bank has been through some rough times past few years but things seem to be turning around. In December 2022, it has transferred stressed loans worth ₹48,000 crores to the ARC under the 15:85 structure for Rs 11,183 crore.
Axis Bank on the other hand has been steady in its performance with Q3FY23 results with another quarter of rising income and profits and a net NPA ratio below 0.5%.

From the other stocks, continued performance from Indian Hotels, BHEL, and Amara Raja Batteries has found favor with the FIIs. One surprise though is FB fintech, more commonly known as Policybazaar.

This one falls in the realm of new-age companies that have listed over the last two years and the stock performance has been downhill since then. From its listing in November 2021, the stock has lost more than 50% of its value to date. Though its revenues are rising every quarter, it has not reported a single quarter of net profit yet. FIIs have increased their stake in this stock from 17.91% in Q2FY23 to 47.99% in Q3FY23.

We did a test on the Univest app to check what our algorithms identify when it is run on these stocks bought by FIIs. Whether they are fundamentally strong or not, what are the short as well as long-term trends on these stocks, and whether would be in the Buy zone for investors.

The results of this exercise are displayed below.

Analysis based on data as of 11th Feb 2023

Six of the ten stocks where FII holding has increased have a Buy verdict in the long term. Three have a “Hold” verdict while only one has a Sell verdict. Eight of the ten stocks have a “Very Strong” long-term trend. UPL is the only stock that is neutral in the long term. The other exception is PB Fintech which has a “Sell” verdict in the long term and the long-term trend is weak.

FII increasing their stakes in any stock is a good metric to measure the sentiment on any stock, though it should be seen along with many other data points to come to any conclusion. While this quarter saw FII investments tilted towards banking, the next quarter is likely to spring some more surprises.

 

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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