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4 BlueChip Stocks FIIs Love. Here's Why...

May 16, 2022

4 Bluechip Stocks FIIs Love

The Russian-Ukraine war combined with weak market sentiment has sent the stock markets on a roller coaster ride. Much like a pendulum, market movements have been erratic in the past quarter.

The BSE Sensex came close to its all-time high of 61,200, only to fall back again to 52,800 (-16%) in February and go back to 56,000 in May, a true testament to its volatile nature.

While most of the domestic institutional investors have been net buyers, a large portion of the foreign institutional investors (FIIs) have been net sellers in the past few months.

For a long time now, FIIs have played a significant role and have been big contributors to inflows in India share markets.

But this stopped when the Fed decided to tighten monetary policy. It meant that global money, which was looking for returns in all kinds of markets, started to flow back to their home countris. And since the US is the spigot for such flows, the money flowed back to the US.

FII selling lead to a fall in Indian markets to some extent.

However, amid the recent sell-off, there are some bluechip stocks in which FIIs are increasing exposure. FIIs have been buying these shares quarter after the other and it's safe to say, they love these stocks!

Here, we outline those bluechip stocks that FIIs can't get enough of.

#1 Siemens Ltd

The Indian arm of the largest industrial manufacturing company in Europe, Siemens India operates as an electric equipment manufacturer.

With multitude of products and service offerings, the company caters to a wide gamut of sectors broadly classified into digital industries, energy, infrastructure, and logistics.

From Indian railways and utilities to the oil and gas and OEMs, Siemens enjoys a strong foothold across the entire industrial value chain.

The company's revenues have grown at a CAGR of 4.1% over the past 10 years, while profits have also grown 4.6% in the same period. With no debt on its books, the business has generated an average return on equity (ROE) of 20.3% in the past 10 years.

This performance has impressed FIIs, making it a favourite among them. So much so that they have raised their stake subsequently in the last four quarters. From a total of 4.8% in the last quarter of 2021 (March 2021), to 5.1% in the last quarter of 2022 (March 2022).

Siemens is currently trading at a PE of 75.5x, which is at a premium to its 10-year median PE of 61x and industry PE of 43.2x.

To know more about the company, check out Siemens' latest shareholding pattern.

#2 Voltas Ltd

India's air conditioning giant, Voltas, was created six decades ago when the Swiss-based Volkart Brothers joined hands with Tata Sons Ltd.

The company excels in the air conditioning and cooling products business, giving stiff competition to several multinationals.

Under its tie-up with the European brand Beko, the company manufactures other home appliances like refrigerators, washing machines, ovens etc.

Voltas also offers engineering solutions for a wide spectrum of industries. It covers areas such as MEP (mechanical, electrical, and plumbing) and HVAC (heating, ventilation, and air conditioning), electro-mechanical projects, etc., which together account for 50% of its total revenues.

Their dominance in the cooling business has facilitated a smooth road to profitability. But the pandemic did hit its profitability affecting its 10 year average.

The revenues and profits have grown by 4% and 5% respectively on a 10-year CAGR basis. The returns have been more gratifying. The business has generated an average return on equity (ROE) of 16% in the past ten years.

With a solid balance sheet in tow, its average dividend yield has been hovering around 1% for the past ten years.

This performance has not gone unnoticed, especially by the FIIs looking for growth opportunities in the country. Lapping up the stock from the last quarter of 2021, they have nearly doubled their stake, from 13.6% in March 2021 to a staggering 26.2% in March 2022.

Voltas is currently trading at a PE of 70.2x, which is at a premium to its 10-year median PE 29x of and industry PE of 63.4x.

To know more about the company, check out the latest shareholding pattern of Voltas.

#3 Indian Oil Corporation (IOC)

A state-owned oil refining and marketing company, IOC boasts 11 refineries and a total refining capacity of 80.6 MTPA, accounting for 1/3rd of India's refining capacity as of 31 March 2021.

An excellent play for the rise in crude oil prices, IOC is a leading player in this space. However, with lingering concerns over the environment, the company is diversifying into electric vehicle charging stations and forging partnerships to set up green hydrogen plants.

The company's performance has been commendable. Barring the one-time pandemic effect, the company's revenues and profitability have grown consistently over the past 10 years cloaking in a CAGR of 3.2% and 9.5% respectively.

It has a comfortable debt to equity ratio of 0.5x and an interest coverage ratio of 7.7x. IOC's average return on equity and return on capital employed (ROCE) has been 12.1% and 11.9% respectively.

Despite some debt on its book, the company has rewarded its shareholders consistently. A dividend paymaster, the company's 10-year average dividend yield has been phenomenal, averaging 5.1%.

IOC is currently trading at a Price to Book value (P/B) of 0.93x, which is at a discount to its 10-year median P/B of 1.2x and industry PB of 1.85x.

FIIs have been hiking up their stake every quarter since the last quarter of 2021 in India's premier oil refiner. From 5.8% in March 2021, they now hold 8.4% of the company.

To know more, check out IOC's latest shareholding pattern.

#4 NTPC Ltd

The government-owned power behemoth NTPC has also been an FII favourite. A true energy conglomerate, NTPC is present across the entire value chain of the power generation business.

Of late, the company has been in the limelight for its subsidiaries, which are due for listing in the next few years. Their listing is expected to unlock massive value for the company. The subsidiaries are in different businesses, ranging from power transmission and distribution to renewable energy.

The company's total revenue has grown at a 10-year CAGR of 6.6% while profits have grown at a 10-year CAGR of 9.1%. The company has a leveraged balance sheet, with a debt to equity of 1.7x in fiscal 2021.

The 10-year average ROE is around 13% which is fairly good considering the company operates in a regulated environment.

Rewarding its shareholders well, the company follows a very liberal dividend policy. The dividend yield in the past 10 years has been averaged to around 3.4%.

Trading at a P/B of 1.1x, the stock seems undervalued when compared to its 10 year historical median P/B of 1.3x and industry P/B of 1.8x.

FIIs have been adding more of NTPC to their portfolios, increasing their stake every quarter since the last quarter of 2021. From a total of 11.9% in March 2021 they now hold 14.7% of the company.

To know more about the company, check out NTPC's latest shareholding pattern.

To conclude...

There are several ways to spot the next best hero stock for your portfolio. Getting inspired by experts is always a good start.

It's always interesting to see what FIIs are doing with their money. Considering all their research and resources, they have a lot at stake.

It's tough to match their gains simply by mimicking their every move. But it can still be good idea to know what they've been up to.

As you're interested in tracking what FIIs have been buying and selling, check out Equitymaster's Powerful Stock Screener.

This tool tracks the stocks recently bought by FIIs as well as the stocks sold by them.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

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