FIIs shift focus to small-cap stocks, increasing investments

Foreign institutional investors (FIIs) are moving their focus from large-cap stocks to selected small-cap companies in India. This shift indicates a change in market dynamics. In the last quarter of 2024, FIIs boosted their stakes in only nine Nifty 50 companies and saw similar trends in the Nifty 100 index. However, many small-cap stocks gained FII interest, with 466 out of 937 small-cap firms experiencing increased stakes. One notable stock is Home First Finance. This company helps first-time homebuyers and saw FII stakes rise from 25.5% to 37.9% between September and December 2024. Key investors included BOFA Securities and Citigroup. However, promoter shares have dropped significantly during this time. Home First aims to double its loan portfolio in the next three years. Another interesting company is One Point One Solutions, which provides business management and technology services. FIIs raised their stake from 3.2% to 14.3% due to interest from Ovata Capital. The company is working on enhancing customer engagement with new technology and plans to expand in healthcare and financial services. Himatsingka Seide, a textile company, also saw a rise in FII stakes from 3.3% to 12.1%. This increase was driven by a purchase from investor Sunil Singhania. The company plans to boost its manufacturing efficiency and reach over 90% capacity in the coming months. GMM Pfaudler, known for its corrosion-resistant technology, raised its FII stake from 14.6% to 19.7%. The company is expanding its operations to Poland to meet rising demand in the pharmaceutical sector. Finally, Network18 Media increased its FII stake from 2.3% to 6.6%. This change aligns with a major merger to create a leading media firm in India. The company aims to further strengthen its market presence across various platforms. In conclusion, while the increased FII interest in small-cap stocks signals confidence, investors should be cautious. Small-cap stocks are more volatile, and retail investors might face higher risks. It is essential to evaluate a company’s fundamentals and growth prospects before investing.