Equity investments by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) in the Indian market have shown a mixed trend over the past six months.
While foreign investors withdrew money in two months during this period, including April, domestic institutions remained consistent and were net buyers.
Cumulative flows by FPIs during this period amount to Rs 75,000 crore, while those of DIIs are 2.4 times higher, totalling just under Rs 1.8 trillion.
Instances of withdrawals for domestic investments have been few, with negative flows or outflows recorded in only four months out of the past 28.
In April, FPIs turned sellers due to the rise in crude oil prices and US bond yields.
Given that institutional investors have substantial holdings in midcap and largecap companies and their actions play a major role in price trends, Business Standard examines the S&P BSE 200 group of stocks in which the two investor categories have shown the most confidence.
The 10 stocks on this list have witnessed at least four consecutive quarters of an increase in shareholding by FPIs or DIIs, respectively.
In the FPI list, except for Mankind Pharma, the shareholding of foreign investors is higher than 20 per cent.
For the DII group of stocks, the highest shareholding is in Voltas at 40 per cent, followed by Delhivery at just under 20 per cent.
Additionally, except for Star Health & Allied Insurance Co, most stocks have delivered strong double-digit returns in the past year, with Indus Towers leading the pack with gains of 129 per cent.
Supreme Industries
Riding on strong demand, Supreme Industries delivered a 41 per cent volume growth in the pipe segment in the January-March quarter of 2023-24.
The segment accounted for over 80 per cent of the company's overall volumes.
Given the robust demand traction, it has guided for overall volume growth of 20 per cent, with the pipe segment expected to grow by 25 per cent in 2024-25.
Geographic expansion through brownfield projects and setting up new plants at Patna and Vijayawada are key positives.
YES Securities is bullish on Supreme s growth prospects, given healthy demand from agriculture, infrastructure, and plumbing segments, coupled with a focus on expanding market share via adding more stock-keeping units, finding newer applications (such as gas distribution), and increasing its distribution network.
Indian Hotels Company
The management of hospitality major Indian Hotels Company is eyeing double-digit growth in revenue per available room for 2024-25 on a high base, led by the opening of 25 new hotels that can add 3,500 rooms, and new businesses growing at over 30 per cent year-on-year.
The uptrend in the hospitality industry, according to Motilal Oswal Research, is expected to continue, with all-India demand growth likely to be 10.6 per cent from 2023-24 (FY24) through 2026-27 (FY27) compared to supply growth of 8 per cent.
Revenue and operating profit of the company are expected to grow by 13 per cent and 17 per cent, respectively, during FY24-27.
Growth, according to JM Financial Research, will be led by a robust development pipeline (80 per cent of which is asset-light), strong traction in new brands, and expansion into newer categories/businesses.
Mankind Pharma
One of the leading domestic pharmaceutical majors, Mankind Pharma is the fourth largest in terms of value and third largest in volume share of the Indian market.
The company s focus on increasing its share of chronic drugs is expected to boost its gross margin.
Growing its presence in diabetes, respiratory, central nervous system, and urology, among others, is expected to help take the chronic share rise to 50 per cent in the long term from 35 per cent in the nine months of 2023-24.
JP Morgan has an overweight stance on Mankind, given a higher revenue growth forecast in the domestic business aided by thrust from modern trade, e-commerce, and hospital channels and guidance of double-digit growth in exports.
New launches in the US can potentially offset declines in one-off opportunities, and pricing growth in domestic business is expected to remain healthy in 2024-25 despite no pricing growth in the National List of Essential Medicines portfolio.
Indus Towers
The successful follow-on public offer and efforts to raise debt by Vodafone Idea (Vi) have removed a key overhang on the recovery of dues for Indus Towers, which offers its telecommunication towers on a rental basis to Vi and Airtel.
IIFL expects Vi to raise its mobile broadband location count from the current 170,000 to 250,000 over the next two years.
It expects Indus to garner 80 per cent of the same, which should boost its tenancy ratio to 1.95 times from the current 1.7 times.
A key trigger would be the resumption of dividend payment, which was suspended due to Vi s receivables issue.
If Indus reinstates its dividend policy of paying out 100 per cent of its free cash flow, the same could translate into a dividend yield of about 6 per cent.
Delhivery
The company is a market leader in India s business-to-consumer express division (outsourced pie) with a market share of 21-22 per cent, nearly twice that of the nearest competitor.
Delhivery is better placed than peers, given its low customer concentration risk of less than 15-16 per cent, scale and reach in T.ier-II and Tier-III cities (18,500 pincodes), and has the lowest cost advantage, says Elara Securities.
A healthy balance sheet with a cash surplus of Rs 4,600 crore as of September 2023 to fund working capital and growth is an added positive.
While the thrust on its own logistics service is likely to impact volumes in the near term, operating leverage and the sustenance of incremental gross margins around 50 per cent in transportation could lead to breakeven at the net profit level in 2024-25, says Emkay Research.
Ashok Leyland
After strong growth in the medium and heavy commercial vehicles industry over the past three years with an annual growth of 18 per cent, some moderation is likely in the near term.
However, positive macros and continuing infrastructure spends should sustain growth in 2024-25.
Within commercial vehicles, categories such as bus, tractor-trailer, and tipper are likely to do well, says Nuvama Research.
An added demand trigger for Ashok Leyland is defence orders, which are expected to take the revenues from that vertical from Rs 300 crore in 2022-23 to about Rs 800 crore in 2023-24, estimate analysts.
Net pricing is expected to stay healthy in the near term, given the price hike of 1.5-2 per cent by the sector and stabilising average discounts.
This is positive for the company which is eyeing a mid-teen margin ahead of the current 11-12 per cent levels.
Voltas
Voltas indicated that its volume growth in room air conditioner (RAC) was 71 per cent year-on-year in the fourth quarter of 2023-24 (FY24) and it has been gaining market share in the quarter (FY24 share expected at 22 per cent) after losing share over 18 months.
Motilal Oswal Research believes that RAC is a long-term structural story, given the low penetration level in India, rising income levels, and thus, aspiration of middle-income group and rising heatwaves across the globe.
UBS Research believes that Voltas has successfully reworked its supply chain in the RAC segment, further optimising its cost structure.
With reducing costs, it will be difficult for new entrants to match Voltas, leading the industry into the early phases of consolidation and potential market-share gains for Voltas, says the foreign brokerage.
FSN E-commerce Ventures (Nykaa)
Nykaa s pre-quarter update for the fourth quarter (Q4) indicates sustained momentum for the beauty and personal care segment with gross merchandise value (GMV) growth at 30 per cent and fashion GMV growth in the high twenties.
Overall, GMV growth has been strong and crossed 30 per cent after three quarters (on a high base of 36 per cent last year).
The performance is relatively superior to other discretionary companies, given the sustained demand weakness in Q4, says Axis Capital.
With competitive intensity moderating and working capital stabilising (at a higher level), a key driver ahead shall be margin delivery, says Nuvama Research.
The brokerage has built in a 400-basis point operating profit margin expansion from 2023-24 through 2025-26.
Key levers for the company include a revival in advertising income, moderation in marketing spends, and operating leverage.
Cholamandalam
The non-banking financial company has delivered its best-ever payouts, collections, and profitability in the fourth quarter of 2023-24.
Net income was 41 per cent year-on-year while net profit was up 24 per cent over the year-ago period.
Cholamandalam Investment and Finance Company is a well-managed franchise and has displayed agility in moving across segments to grow ahead of the industry with no major asset quality issues, says Centrum Research.
Repricing of automobile loans will help offset a higher cost of funds and support steady net interest margins, while return on assets can rise 20 basis points from 2023-24 (FY24) through 2025-26 (FY26), says Jefferies Research.
Earnings are expected to rise at an annual growth of 30 per cent during FY24-26, estimate analysts.
Over 70 per cent of analysts polled by Bloomberg are bullish on the stock; their target price indicates over 10 per cent upside potential.
Star Health & Allied Insurance Co
Star Health & Allied Insurance Co is the largest private standalone health insurance company in the country and has the largest retail health insurance share based on gross written premium (GWP).
In 2023-24 (FY24), the company s retail health market share stood at 33 per cent.
The company highlighted that the GWP growth in FY24 was a result of strong retail health insurance demand that the company capitalised on through one of the largest agency networks, its strong digital channel sales, and collaborations with banks and financial institutions.
Loss ratios improved 356 basis points sequentially to 64.1 per cent as the impact of price hikes kicked in, and seasonal illnesses abated, driving the normalisation of loss ratios.
Investments in preventive health checkups also helped loss ratios.
Nuvama Research says it is enthused by Star Health s improving commentary and focus on growth, with targeted improvement in loss ratios.
Seventy per cent of the analysts covering the stock have a buy rating on the insurer.
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