FII Allocation to Small- and Mid-cap Stocks Highest since 2005

In CY23, small-caps and mid-caps outperformed large-caps by 28 per cent and 24 per cent respectively. The popular narrative was that this was due to strong domestic mutual fund flows, Ambit Capital said.

“We challenged this narrative and highlighted that 67 per cent of FII flows (CY23- US$21.4bn) were in small- and mid-caps while for domestic funds, it was 57 per cent (CY23: US$21bn).

FII flows exceeded that of DMFs in small-caps (3.3 per cent vs 1.8 per cent) as well as mid-caps (3.3 per cent vs 2.4 per cent). FII allocation to SMID (23 per cent) is the highest since 2005, Ambit Capital said.

On a sectoral basis, BFSI, Capital Goods and Auto received 72 per cent (US$14.8bn) of FII inflows. One key investor demand is to highlight SMID stocks that garnered FII's attention amid these strong FII flows into SMID, Ambit Capital said.

Domestic Institutional Investors (DIIs) recorded the eighth consecutive month of inflows in March 24 at USD6.8b, the highest since April 20, Motilal Oswal Financial Services said.

FIIs, too, recorded strong inflows of USD4b in March 24. FII inflows into Indian equities stand at USD1.4b in CY 24 YTD vs. inflows of USD21.4b in CY23. DII inflows into equities in CY 24 YTD continue to be strong at USD13.1b versus USD22.3b in CY23.

The Nifty touched a fresh high of 22,527 in March 24 and ended 1.6 per cent higher MoM at 22,327. The index has closed higher for the second successive month, the brokerage said.

The Nifty is up 2.7 per cent in CY24YTD. During the last 12 months, mid-caps and small-caps have gained 60 per cent and 70 per cent, respectively, while large-caps have risen 29 per cent only. During the last five years, midcaps have outperformed large-caps by 71 per cent, while small-caps have outperformed large-caps by 37 per cent.