Chart Beat: Promoters ditch large caps and mid caps alike as crude worries loom
Amid lurking global risks such as geopolitical tensions and delayed interest-rate cuts, stock market participants are becoming increasingly nervous. Promoters in listed Indian companies have reduced their stakes across the board, according to an IIFL Securities analysis of foreign institutional investor (FII) and domestic mutual fund (MF) shareholdings in NSE 500 stocks.
“With FIIs and MFs each pouring in about $25 billion net in Indian equities during FY24, they increased their overall stake across mcap categories, while promoters downstaked, and both trends have been more prominent in mid and small caps,” said the IIFL report on 1 May.
The trends reveal that promoters’ stakes in large caps, mid caps and small caps was at a multi-quarter low in the March quarter of FY24 (Q4FY24). However, there was minimal movement in Q4 itself, with 90% of the changes in all categories having taken place in the first three quarters.
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Investor are cautious for several reasons even as the Indian economy is expected to perform better than its Asian peers in FY25. A key near-term worry is elevated crude oil prices, which would reduce companies’ profits and hamper India’s fiscal position.
Usually, large caps are seen as better than mid and small caps during times of increased market volatility, but expensive valuations and the risk of lower-than-expected earnings growth in FY25 may have prompted promoters cut their stakes in these companies, too.
The MSCI India index is trading at a one-year forward price-to-earnings multiple of about 20, according to Bloomberg data, a steep premium to the MSCI Asia-Ex Japan and MSCI Emerging Markets indices.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.