The ULTIMATE Guide for Top Stocks Seeing Massive FII Buying

Foreign institutional investors (FIIs) have historically made massive investment in Indian companies. Driven by a keen interest in India's flourishing economy, FIIs often seek out undervalued assets that might not receive the same attention in other markets.

While replicating FII trades may not guarantee the same level of success, understanding their movements can be enlightening for individual investors.

Observing their actions can provide a sense of the broader market sentiment, potential sector trends, and investment opportunities.

Here are some of the stocks that FIIs have been buying recently.

These companies have filed their September 2023 quarterly shareholdings which revealed that FII holding has gone up substantially.

#1 HDFC Bank

At the top of our list is HDFC Bank.

HDFC Bank is the largest private sector bank in India. It enjoys a high market share (15-20%+) in most retail loan categories like unsecured retail, vehicles, and even mortgages post its impending merger with HDFC Ltd.

The bank's track record speaks for itself and shows how efficient the management has been because maintaining asset quality while growing the business is of utmost importance. HDFC Bank has aced the game on both fronts.

However, despite a long history of steady growth and profits, the stock has taken a beating in recent months. Most of which comes on the back of weak operational near-term guidance by the management itself.

As a result, the 5^th largest bank in the world is trading at a P/B ratio of 3x, a 33% discount to its 5-year median of 4x.

HDFC Bank Financial Snapshot (2019-23)

	2017-2018	2018-2019	2019-2020	2020-2021	2021-2022
Net Profit Growth (%)	20.93%	21.61%	16.71%	19.76%	20.96%
Advances Growth (%)	24.17%	20.07%	13.57%	19.88%	16.96%
Deposits Growth (%)	17.01%	24.25%	16.36%	16.82%	20.84%
Return on Equity(%)	17.05%	16.54%	16.50%	16.70%	17.24%

Data Source: Ace Equity

While HDFC Bank is jittery about its near term performance, it remains optimistic about robust growth over the long-term. This explains the heavy buying among the FIIs in the past quarter.

FIIs have raised their stake in the bank from a total of 33.4% in the quarter ending June 2023 to 52.1% in September 2023.

This massive 18.7% jump probably comes from HDFC Bank's focus on deposit mobilisation and branch expansion to drive growth. Moreover, the bank seems well-placed to capitalise on the pickup in the corporate credit cycle.

It is also confident of long-term synergies from the merger with HDFC Ltd.

To know more, check out its financial factsheet and latest financial results.

#2 Voltamp Transformers

Next on our list is Voltamp Transformers.

Voltamp Transformer is a significant manufacturer of oil-filled power and distribution transformers. The comprehensive product portfolio is a direct result of the company's technical collaborations with a myriad of pioneers in the world.

It boasts a well-diversified customer base of over 1,000 customers across various end-use industries such as power, oil refineries, textile, chemical, real estate, automobile, infrastructure, and steel.

The stock has done exceptionally well in the past few years. From 2021 to 2023, the stock has surged threefold. And now, it is trading at a PE ratio of 20x, well above its five-year median PE of 14x.

Despite the implied high valuations, FII's have invested heavily in the stock. They have amped up their stake from 14% in the quarter ending June 2023 to 22.3% in September 2023, marking a rise of 8.3%.

This leap is led by a strong history of profits and growth prospects.

Voltamp Transformers Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	27.56%	1.38%	-12.80%	53.01%	21.79%
Operating Profit Margin (%)	15.74%	14.33%	21.65%	16.14%	19.56%
Net Profit Margin (%)	10.24%	10.41%	16.21%	11.78%	14.44%
Return on Capital Employed(%)	18.86%	15.90%	17.83%	19.59%	25.50%
Return on Equity (%)	12.98%	12.46%	14.18%	14.96%	19.51%

Data Source: Ace Equity

Between 2019-2023, the net sales and profits have registered at a 5-year CAGR of 16% and 22%, respectively. The returns have been strong, with a 5-year average RoCE and RoE of 19.5% and 14.8%, respectively.

Given the energy transition, increased private investment, and government incentives in manufacturing, Voltamp Transformers is well-positioned for substantial growth.

To know more about the bank, check out its financial factsheet and latest financial results.

#3 TD Power

Third on the list is TD Power.

TD Power is a leading manufacturer of AC generators, delivering across a wide product spectrum. The company boasts a diversified product portfolio, customizing generators for a wide range of turbines, engines and special applications.

Over the years, the company has built a strong in-house research and development with full ownership towards it.

The stock has performed exceedingly well in the past few years. From 2021 to 2023, the stock has surged eightfold, generating massive shareholder wealth.

Presently, it's trading at a Price-to-Earnings (PE) ratio of 38, surpassing its five-year median PE of 22. However, the high valuations haven't dampened the FII's spirit.

FIIs have raised their stake in the company from a total of 2.6% in the quarter ending June 2023 to 10.6% in September 2023.

This jump can be attributed to the strong history of profits and growth prospects.

TD Power Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	3.86%	12.79%	14.17%	35.04%	9.57%
Operating Profit Margin (%)	7.32%	8.52%	11.21%	12.55%	15.09%
Net Profit Margin (%)	0.60%	5.02%	6.32%	7.79%	9.52%
Return on Capital Employed(%)	2.66%	8.79%	12.97%	17.69%	22.29%
Return on Equity (%)	0.74%	7.08%	10.02%	14.11%	17.11%

Data Source: Ace Equity

The company turned profitable in FY2019, after making losses between FY 2015-18.

Between 2020-23, the net sales and profits have grown phenomenally at a 4-year CAGR of 17.5% and 135%, respectively. The returns have been admirable, reporting a 5-year average RoCE and RoE of 12.8% and 9.8%, respectively.

The company boasts a strong orderbook of Rs 13.8 bn and is well-poised to benefit from a pick-up in industrial capex in the country.

To know more about the company, check out its factsheet and latest quarterly results.

#4 Amber Enterprises

Fourth on our list is Amber Enterprises.

Amber Enterprises is a leading heating, ventilation, and air conditioning player in the country. The company commands a substantial 23.6% share of the Room Air Conditioner market.

It is also a leading solution provider in the Indian air conditioner original equipment and designer manufacturer (OEM/ODM) industry.

The stock has been on a rocky terrain from 2021 to 2023. Currently, it has a PE ratio of 61x, close to its five-year median PE of 55x.

FII holding in the stock has gone up from 22.4% in the quarter ending June 2023 to 29.6% in September 2023, marking a rise of 7.2%.

This can be a testament to the company's impressive track record of profitability and its bright prospects for future growth.

Amber Enterprises Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	29.26%	43.77%	-22.85%	38.39%	64.63%
Operating Profit Margin (%)	8.11%	8.03%	8.39%	7.33%	6.79%
Net Profit Margin (%)	3.44%	4.14%	2.75%	2.64%	2.36%
Return on Capital Employed(%)	14.31%	17.00%	9.22%	8.35%	10.75%
Return on Equity (%)	10.09%	15.53%	6.10%	6.70%	9.14%

Data Source: Ace Equity

Between 2019-23, the net sales and profits have registered at a 5-year CAGR of 26.7% and 21.3%, respectively. The return ratios have also been decent, with a 5-year average RoCE and RoE of 11.9% and 9.5%, respectively.

Going forward, Amber Enterprises plans to boost margins through backward integration, faster component growth, capex investments, new clients, and PLI advantages.

The industry also looks promising, thanks to the refrigeration and air conditioning segments, in tandem with the opportunities arising from the AC import ban in India.

To know more about the company, check out its factsheet and latest quarterly results.

#5 IDFC First Bank

Last on our list is IDFC First Bank.

IDFC First Bank is one of the strongest banking players in the country.

In the last five years, between 2019-2023, the private lender has increased its advances at a CAGR of 23.8%. Its asset quality has been good, with an NPA ranging from 1.2-1.8% in the past 5 years.

IDFC First Bank Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Net Profit Growth (%)	-2.97%	0.51%	-1.17%	-0.73%	17.78%
Advances Growth (%)	65.44%	-0.82%	17.47%	17.21%	28.79%
Deposits Growth (%)	46.45%	-7.50%	36.04%	19.20%	36.89%
Return on Equity(%)	-11.23%	-16.92%	2.90%	0.68%	10.60%

Data Source: Ace Equity

However, the bank has reported a loss in the past due to the mergers and acquisitions it has undergone. It has reported a loss twice in the past 5 years, once due to the merger with Capital First and in 2020 due to a one-time provision cover towards stressed accounts.

But now, the company's fortunes seem to be taking a turn. And the recent stock performance implies that the company's patchy performance may just be a thing of the past.

In the past year, the stock has doubled in value and is available at a P/BV of 2.3x. Despite trading at a 50% premium to its 5-year median P/BV of 1.2x, FIIs have been heavily investing in the stock.

The FIIs raised their stake in the company from 20.9% in the quarter ending June 2023 to 24.5% in September 2023.

This 3.6% expansion in FII shareholding comes from the fact that the bank sports a relatively clean balance sheet and is gearing more towards high-maintenance businesses.

It's confident of maintaining high margins in the future and seems well-positioned to benefit from the uptick in credit growth.

To know more about the bank, check out its financial factsheet and latest financial results.

Apart from the stocks above, here are some other companies where FIIs have raised their stakes.

Snapshot of Stocks where FIIs have Hiked Stake

Please note these parameters can be changed according to your selection criteria.

Since you're interest in FII buying and selling activity, check out Equitymaster's stock screener which has a separate section for stocks bought by FIIs and stocks sold by FIIs.

Happy Investing.

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