Swinging With The FII Trend

FIIs are very nimble-footed and make their decisions very fast; this quality helps them to spot outperformers very quickly but the pitfall is they are equally quick in selling the stock. That is the reason why investors must work out a strategy to keep pace. Join Anthony Fernandes as he looks at how stocks with high FII holding have performed over time.

- Anthony Fernandes

One of the biggest mysteries of the stock market is to uncover details about foreign institutional investors (FIIs) buying stocks. It is not an exaggeration to say that FII buying can often make or break the fortune of a stock. The example which comes to mind immediately is a technology-driven company, Vakrangee Limited. The fortune of this company changed twice within the span of three months backed by heavy FII buying, followed by FII selling. The heavy FII buying took the stock from its 52-week low in June 2015 to its 52-week high in August 2015. However, after news of the failure to get a payment license, the stock hit its 52-week low again in the same month, i.e. August 2015.

The sentiment in the market is to always favor hot stocks that are being bought by the FIIs. This data can be availed by the retail investor every quarter once the companies declare their shareholding pattern. An increase in FII holding would mean that FII buying was active in the last quarter and a decrease of the same would mean that FIIs are exiting the stock as they do not see potential remaining for gains or simply because they want to book profits. As an investor, this information however comes a little too late as the stock price action has already taken place. What really matters is getting a piece of the pie before the FIIs come in. If retail investors can identify stocks before or during FII buying, then the potential for returns are high!