FIIs now interested in large-cap stocks: Kotak Institutional Equities

Foreign institutional investors (FIIs) are now interested in large-cap counters after the recent corrections, according to Pratik Gupta, CEO & Co-Head, Kotak Institutional Equities. He added that retail investors are worried about their exposure to small-and mid-cap counters and remain concerned about the risk of more earnings downgrades.

As per Gupta, most local MF, insurance and PMS funds are seeing a slowdown in their equity inflows, but the overall net inflows continue. However, the nature of the flow has changed from small & midcap/ thematic- sectoral funds till a few months ago, to large-cap or balanced debt-equity funds.

He also said that fund managers in emerging market (EM) were hopeful of inflows into EMs as an asset class by only later this year due to increased valuation disparity with the US equity markets. He said that India would not be their priority given slowing growth and relatively expensive valuations as of now.

Some also highlighted that India’s capital gains tax negatively impacted return expectations in contrast to the last few years when Indian equities were giving more than 20% returns, and the rupee and dollar were relatively stable.

Gupta said Kotak Institutional Equities continues to be bullish on large private banks and NBFCs, life insurance companies, residential real estate, hotels and the airlines/hospitality sectors.