Should investors follow FII actions in the stock market?

Foreign institutional investors (FIIs) were the net buyers in the Indian equity markets in the year 2020.  FII net investment stood at Rs. 1.7 lakh crore (source: NSDL) in equities in the year 2020. However, they have reduced their stake in some of the companies sequentially in the quarter ended December.

We have shortlisted the companies from the Nifty 100 list in which the FII have reduced stake in the December quarter.
 

Source: Ace Equity

The above table shows that FII has reduced stake in some of the top companies like Reliance Industries, Tata Motors, Avenue Supermarts, Tata Consultancy Services, Lupin Ltd. etc. 

According to market experts and media reports, FII reducing stake in large-cap stocks could be a sign of rebalancing the portfolio or booking profits as many of the companies are already trading at 1 year high in the stock market.

What investor should do?

FIIs raising or reducing stake should not be the only parameter to make buy or sell in the stock market. The investors should also

• Check the fundamentals of the company. The investor can add or hold the stocks with strong fundamentals.
• Under fundamental parameters, one can check Cash flows, EPS, PEG ratio, revenue growth as well as future CAPEX plans etc.
• The investor should also study the management and future expansion plans of the company.
• The investor can also use technical parameters to make their buy or sell decisions in the stock market.

Disclaimer: The above report is compiled from information available on the public platforms. These are not buy or sell recommendations.