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Modi Government Induced FIIs in Midcaps!


As the rally begun lot of speculation is happening about how far it will reach. At first it was not believed that the markets have indeed started going up. Then there was so much churning of macro data and data was real bad. So the sustainability of the levels achieved by the benchmark indices was questioned. Then the indices actually crossed the 2008 high values. But the churning of volume data started. Volumes were very low at the time it crossed 2008 levels.

We are witnessing the markets are just going up. So what has really happened here?
Retail investors who suffered losses in 2008 crash were still in the dilemma whether they would go for it or not. Mutual fund investors also faced huge losses and could not trust the funds would be safely manage their hard earned money. Many mutual funds were in a sorry state in terms of AUM. Lack lustre peaks and troughs were experience by the investors till year 2012. But after hitting a low during October 2013 markets have showcased a spectacular rally.

Off course the Modi Effect has been a major catalyst to the rally but gradual changes in the global macro also had a lot to do. US jobless data has been improving for almost 3 years after hitting the worst in the year 2009. QE has been proved effective in the revival and there was evidence of green shoots in the economy. Europe too somehow recovered from the famous Eurozone Crisis. The data does not say that all is well in these countries. But recovery is definitely on its way as per the macro data.

So if all these thing were eminent did we as retail investors make the most of the rally?
The answer here is no! Of course not, as many of us did not participate at all here. If we take a look at the cash volume on BSE and NSE combined it did not cross Rs 10000 Cr significantly until March 2013. But it did pick up slowly from combined Rs 6000 Cr average to around 20000 Cr recently. The shift in the sentiment from negative to neutral to positive was gradual. But the markets did not wait for the confidence at broader level and continued ascend.

But the FII inflow has been on the record high this financial year.
There are many aspect to the FII investments in India. Interest rates in the US are at their lowest as a policy decision. Deflation scenario in the Europe too is forcing the policymakers to still reduce the rates. That leaves a lot of room for the funds to invest in the emerging markets as economy is reflecting quantitative decisions taken by policymakers.

In India change of guard, lead by PM Mr. Narendra Modi has been very positive to the FII investment sentiment. Falling prices of crude, easing of inflation and probable rate cut out of macro scenario improvement also lead to the fact that economy is on recovery path.

So there is huge inflow of foreign money in the equity markets. Following are a few names where the investment by FIIs has gone up in Dec 2013, March 2014 and June 2014 Quarter.

Ceat, Pennar Industries, UPL, APL Apollo Tube, Natco Pharma, HDIL and Zee Learn have seen FIIs raise stake by four to eight percentage points during the quarter. FII stakes in information technology companies such as eClerx Services, Polaris Financial Technologies and Persistent Systems have increased by three to four percentage points, on hope of an uptick in spending by clients and a rise in discretionary spending during 2014. Aurobindo Pharmaceuticals, FDC, Biocon, Oberoi Realty, Indiabulls Real Estate, Amara Raja Batteries and PVR have seen FIIs raise stake by one to three percentage points, data shows. However, their holdings in Ashok Leyland, Voltamp Transformers, Jubilant Life Sciences, Peninsula Land and Tilaknagar Industries declined a little more than two percentage points each.

Data from stock exchanges show FIIs increased their holdings in several mid-cap companies such as Dhanlaxmi Bank, Page Industries, Jagran Prakashan, McDowell Holdings, Nesco and Financial Technologies, in the March quarter.

A keen eye on this data can lead us to similar profits they have made so far. The data is available on SEBI website. All the companies declare their stock holding patterns at the end of every quarter. We can analyze the FII investment based on this publically available data.

We need to follow these companies where FIIs are investing heavily. This is because a lot of research is done by them before doing so. So apart from our own fundamental analysis FII investment data definitely gives us some sort of confirmation.

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