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Rajesh Abraham

`They are using the fall to average their costs'

Mumbai , June 8

After the meltdown in mid-cap stocks in the last couple of weeks, foreign funds led by Goldman Sachs, HSBC, Citigroup and Fidelity have started buying shares of select companies in this segment.

Analysts said foreign funds were buying mid-cap stocks, as they looked attractive at current prices. Further, FIIs are also using the fall to average their costs as they had made investments at higher levels, they said.

Some of the counters that saw active buying include Bombay Dyeing, Mangalam Cement, NIIT Ltd, Alok Industries, S. Kumars, Jain Irrigation Systems, Shriram Transport Finance, Mastek, Amtek Auto and Opto Circuits.

The BSE Mid-Cap index has fallen by about 30 per cent since the peak of May 10.

According to NSE data, Goldman Sachs Investment was an active player in the last few days, buying up stocks such as S.Kumars (one lakh shares), Igarashi Motors (over 2.24 lakh shares), Shriram Transport Finance (79,761 shares), Mastek (6 lakh shares) and IVRCL (6.05 lakh shares).

In a smart move, Goldman Sachs sold as much as 77 lakh shares or 2.19 per cent stake in Himachal Futuristic Communications Ltd between April 6 and May 10 period, when the stock was trading at 52-week high price of around Rs 45-levels. Thereafter, HFCL shares have fallen by almost 50 per cent to Rs 23-levels. Goldman still holds about 3.20 per cent stake in the company.

"Most foreign funds have used the peak levels to partially exit from the mid-cap stocks. Now, after the over 50 per cent correction in many mid-cap stocks, foreign funds are making selective investments in this sector," said a research analyst with a local broking outfit.

For instance, Credit Suisse sold as much as 14.55 lakh shares in LML Ltd at about Rs 33-range during May-end. Now the stock is trading at Rs 23-levels.

Mid-cap cement stock Mangalam Cement Ltd, which fell by over 31 per cent in the last two weeks, is another counter that attracted FII interest. Citibank bought 14.6 lakh shares or 5.17 per cent stake in the counter early this week at about Rs 170-range. The stock fellfurther to Rs 155-range on Thursday. Citibankalso bought 13,117 shares in India Infoline recently, hiking its staketo 5.04 per cent.

HSBC was another major buyer in mid-cap counters in recent days. Some of the picks by the foreign fund include Bombay Dyeing (1.32 lakh shares) and Electrotherm India (25,979 shares). The FII used the recent peak to pare its holdings in Ind-Swift Lab (sold 2.08 lakh shares) and NIIT Ltd (2.05 lakh shares).

Fidelity, which is the biggest player among FIIs in India after HSBC, was also active in the secondary market recently. It bought stocks such as NIIT Ltd (about seven lakh shares) and Punj Lloyd (36,059 shares). The foreign fund also has used the recent peak to trim its holdings in companies such as McDowell & Co (sold 29,921 shares at Rs 553-range) and Satyam Computer (19.05 lakh shares).

Warburg Pincus bought over 42 lakh shares in Amtek Auto recently while another FII Caledonia Investments purchased 43 lakh shares in Alok Industries early this week.

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