The year 2010 has started off on a positive note for Indian equities, especially in terms of attracting inflows from overseas investors. In the first 15 days of the year, foreign institutional investors (FII) have net purchased Indian equities worth Rs 8,191.6 crore or $1.8 billion, close to the average monthly inflow of Rs 9,852.18 crore witnessed in the past six months. During 2009, FIIs had net purchased equities worth Rs 83,400 crore, the highest so far in a single calendar year.
However, it has been seen that many of the overseas investors are heading towards small-and mid-cap stocks rather than large-cap stocks. During the first two weeks of January, the BSE small-cap and mid-cap indices have clearly managed to outperform the 30-share Sensex. The small-cap index had generated a return of 7.33%, while the BSE mid-cap index climbed 4.95%, compared with Bombay Stock Exchange Sensex?s marginal gain of 0.51%.
?After a long time, we are seeing excitement back in mid and small-cap stocks,? said Ramdeo Agarwal, MD, Motilal Oswal Securities, adding, ?Since large-cap stocks are looking expensive after last year?s record rally, there is some selling coming up and the interest is shifting towards mid-cap counters. We believe the activity in mid-cap counters will really pick up from here?.
Large overseas institutional investors have purchased shares of some of the small and mid-sized companies in large numbers, according to data available with the BSE. For instance, in the past fortnight, Copthall Mauritius Investment had bought 9.5 lakh shares of Amtek Auto at Rs 189.94 per share. Similarly, Standard Chartered Bank, Mauritius, had purchased 6 lakh shares of Sundaram Multi at Rs 45.50 per share, while Royal Bank of Scotland bought 2.32 lakh shares of Southern Online at Rs 26.50 per share.
Other major secondary market deals include CITI Group Global Markets? investment in Magma Financials, Merril Lynch?s investment in Adhunik Metals and Tree Line Asia Master Funds? investment in KS Oils.
Harijith Sing Sethi, country head (institutional equity broking) Almondz Global Securities Ltd, said, ?The differences between valuations of large-cap stocks and small and mid-cap stocks, which have increased substantially, is now being bridged. Since there is deep value available in mid-cap counters, we are seeing increased interest among the investing community?.