FIIs are Buying these 5 Stocks. Here's Why...

Foreign institutional investors (FIIs) have made quite a splash in Indian equities in recent months. The first half of the fiscal year 2023-24 saw a remarkable influx of Rs 1.4 trillion (tn) into Indian equities, marking the highest level of foreign capital inflows in over two years.

These investments helped propel the Sensex and Nifty to record highs on multiple occasions.

However, the situation took a U-turn in September, as Indian equities experienced a significant withdrawal of US$ 2.2 billion (bn) in FII funds, one of the sharpest single-month declines since January.

The primary reason behind this reversal was the rapid increase in US borrowing costs, which created headwinds for risk assets across the globe.

Despite this cautious backdrop, there are a select few companies that have managed to attract heavy FII buying during the second quarter.

Let's look at the top five stocks where FIIs have increased their stake between the July-September 2023 quarter.

#1 NIIT Learning Systems

Leading the list is NIIT Learning Systems.

The company operates as an education technology company. It provides K-12 learning solutions which incorporate technology in the curriculum with real-life examples. NIIT Learning Systems serves students in India.

The latest shareholding pattern for NIIT Learning Systems reveals that FII have increased their stake from nil in the June 2023 quarter to 18.9% in September 2023.

This heightened FII interest can be attributed to the company's foray into the climate action movement, cementing its position with a strategic partnership and substantial investment from a European organization, supported by European Union funding.

While initially targeting Europe, the company's expansion plans extend to the US and Asia. Additionally, the integration of AI into learning methods bolsters its appeal to FIIs, enhancing its competitive edge in the education sector.

Furthermore, the company's financial performance for the September 2023 quarter is impressive, with consolidated net revenue reaching Rs 3.8 bn, a robust 27% increase compared to the corresponding period in the previous year.

The net profit also saw growth, reaching Rs 470 million (m) from Rs 370 million year-on-year, up 27%.

Looking ahead, the company anticipates the launch of Xsel, a modern real estate learning platform tailored for real estate brokerages and their agents. This strategic direction and strong financial performance make NIIT Learning Systems an attractive option for FIIs.

For more details, see the NIIT Learning Systems company fact sheet and quarterly results.

#2 Sula Vineyards

Second on the list is Sula Vineyards.

The company distribute wines under a bouquet of popular brands, including RASA, Dindori, The Source, Satori, Madera & Dia, with its flagship brand Sula being the category creator of wine in India.

The company earns its revenue mainly from the production of wine, the import of wines and spirits, and the distribution of wines and spirits.

In the September 2023 quarter, FIIs significantly increased their holdings in the company, raising their stake from 6.8% in the June 2023 quarter to 20.65%. This surge in FII interest is primarily attributed to the company's strategic expansion efforts.

Sula Vineyards has been actively expanding its hospitality sector, adding approximately 50% more hotel rooms in Nasik over the past six months.

This expansion responds to the consistently high demand, with weekends frequently booked well in advance, reflecting the growing interest in the unique Sula Vineyards experience.

Over the years, Sula has not only transformed the Indian wine industry but has also achieved remarkable success in wine tourism, providing enthusiasts with a taste of their exceptional achievements.

For the September quarter, the wine producer announced double-digit sales growth.

Furthermore, Sula reported its highest-ever net revenues in Q2. The company's brand revenue increased by 14% year-on-year, reaching Rs 1.2 bn for the July-September period, and revenue from its wine tourism unit grew by 26% to Rs 121 m.

Looking ahead, the company is determined to increase its market share and boost its earnings, capitalizing on the strong demand and expanding its presence in the industry.

For more details, see the Sula Vineyards company fact sheet and quarterly results.

#3 Xpro India.

Third on the list is Xpro India.

Xpro India is a Birla group company, one of the country's largest industrial houses with a global presence in manufacturing and trading activities.

For the September 2023 quarter, FIIs have increased stake in the company to 11.9% from a mere 0.1% in the June 2023 quarter.

This surge in FII interest can be attributed to Xpro India's recent Power Delivery Agreement (PDA) with Tata Power Renewable Energy Limited (TPREL), a key player in the renewable energy sector and a Tata Power subsidiary. The PDA entails the establishment of a 3.125 MW AC Group Captive Solar Plant through a Special Purpose Vehicle (SPV). The SPV will take charge of developing, operating, and maintaining this captive solar power facility.

On the financial front, for the June 2023 quarter, Xpro India witnessed a 17% decline in revenue, amounting to Rs 13.1 billion, and a significant 38.9% drop in net profit, totalling Rs 1.1 billion.

Looking ahead, Xpro India has ambitious plans to double its capacity for the production of dielectric and other technical grades of biaxially oriented polypropylene film over the next 2-4 years.

This expansion initiative aims to cater to the growing demand for its products, both in domestic and international markets, further strengthening the company's market position and appeal to investors.

For more details, see the Xpro India company fact sheet and quarterly results.

#4 Coforge

Fourth on the list is Coforge.

Coforge is a global digital services and business solutions provider with in-depth domain expertise that specialises in selected industry verticals.

The company delivers services around the world directly and through its network of subsidiaries and overseas branches.

In the September 2023 quarter, the company witnessed a notable increase in its FII stake, rising to 34.4% from 24.8% in the preceding June quarter.

This surge in FII interest can be attributed to Coforge's strategic launch of an AI platform. On August 24, 2023, Coforge introduced the Gen AI platform, designed to empower enterprises with AI capabilities.

Coforge Quasar, a key component of this platform, comes equipped with over 100 APIs readily available for integration.

Notably, the platform operates within a governed framework, encompassing process governance, Application Programming Interface (API) governance, and model governance at its core.

Financially, for the September 2023 quarter, the company reported a 16% year-on-year increase in revenue, reaching Rs 22.8 billion.

However, the net profit experienced a 10% decline, totalling Rs 1.8 billion. Additionally, the Board announced a second interim dividend of Rs 19 per equity share for the financial year 2023-24.

Looking ahead, Coforge is determined to strengthen its presence in the AI sector and expand its clientele, further solidifying its position as a leader in the field.

For more details, see the Coforge company fact sheet and quarterly results.

#5 SJS Enterprises

Last on the list is SJS Enterprises.

SJS Enterprises makes a wide range of aesthetic products catering to segments including two-wheelers, passenger vehicles, commercial vehicles, consumer durables and appliances.

Notably, during the September 2023 quarter, foreign institutional investors (FIIs) significantly increased their stake in the company, elevating their ownership from 5.3% in June 2023 to 14.3%.

This heightened FII interest can be attributed to the favourable industry trends within the auto ancillary sector. In the fiscal year 2022-23, the automotive industry experienced a substantial upswing in both production and sales, primarily driven by increased economic activity and enhanced mobility.

A noteworthy trend has been the surge in automobile sales, with a growing preference for larger and more powerful models. This is evident in the popularity of SUVs in the passenger car segment and the rising demand for 250cc-plus bikes.

While the company's financials for the June 2023 quarter showed a modest increase in revenue, reaching Rs 11.7 billion from Rs 11.6 billion in the previous quarter, the net profit for the same period experienced a 9.5% decline, amounting to Rs 1.8 billion.

Looking ahead, the company is poised to enhance its revenue and expand its network, capitalizing on the favourable industry dynamics and the heightened FII interest, solidifying its position in the market.

For more details, see the Sula Vineyards company fact sheet and quarterly results.

Conclusion

Investing in stocks that foreign institutional investors (FIIs) are buying can be an interesting strategy, as FIIs often have access to extensive research and resources, and their investment decisions can reflect a level of confidence in the company's prospects.

However, FIIs often have specific objectives or constraints that may not align with individual investors' needs. Their investment horizon, risk tolerance, and goals may differ from yours, so blindly following their investments may not be suitable for your portfolio.

Further, by the time FII investments are publicly disclosed, the stock price may have already moved, potentially reducing the upside potential and increasing the risk.

FII investment activity can provide valuable insights it should be just one part of your investment decision-making process. Conduct your research, align your investments with your financial goals and risk tolerance, and consider the broader market context.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...