Strong buying by foreign investors have seen the market value of the companies in which FIIs raised their stake up by an average of 19 per cent against an average of a little less than 12 per cent gain recorded by the remaining companies.
The gush of liquidity has seen the mid-cap and small-cap indices outperform larger peers. Since October, the S&P BSE mid-and small-cap indices have rallied 15.7 and 18.5 per cent, respectively, as compared to a modest 8.7 per cent gain on the S&P BSE Sensex.
FII stakes in information technology companies such as eClerx Services, Polaris Financial Technologies and Persistent Systems have increased by three to four percentage points, on hope of an uptick in spending by clients and a rise in discretionary spending during 2014.
Aurobindo Pharmaceuticals, FDC, Biocon, Oberoi Realty, Indiabulls Real Estate, Amara Raja Batteries and PVR have seen FIIs raise stake by one to three percentage points, data shows. However, their holdings in Ashok Leyland, Voltamp Transformers, Jubilant Life Sciences, Peninsula Land and Tilaknagar Industries declined a little more than two percentage points each.
"With the US Federal Reserve tapering its bond buying programme, India could see moderation in flows. This will particularly impact the sectors/stocks where FII holding is high. With four months remaining for the Lok Sabha elections, a lot of action is expected on the political front, which is likely to keep markets volatile and the environment uncertain," Rajgarhia cautions.
For Harendra Kumar, managing director at Elara Capital, Entertainment Network India, Navneet Publication and TTK Prestige remain value buys in the mid-cap space. Shriram Transport Finance, Glenmark Pharmaceuticals, Cummins India, Crompton Greaves, Supreme Industries and SKS Microfinance are the top mid-cap picks for Dhirendra Tiwari, head of research at Antique Stock Broking.