Despite the rally in mid-caps for the past three years, overseas investors continue to show their preference for blue chips.
In the past five financial years, nearly three out of every four dollars, or about 75 per cent of the money put in by foreign portfolio investors (FPIs), have been invested in the top 10 per cent of the BSE 500 companies with the highest market capitalisation.
For instance, the top 50 companies by market capitalisation made up 71 per cent of the total FPI investment in the BSE 500 universe, the shareholding pattern for the quarter ended March 2017 shows. In fact, the top five companies in the index bagged nearly 25 per cent of the investments, hinting at the kind of concentrated portfolio held by the FPIs.
In contrast the bottom 50 companies have received less than 1 per cent of the investment from foreign investors for each of the five years.
Shareholding data for the quarter ended March 2017 reveals FPI investments in these firms made up a meagre 0.3 per cent of their overall investment in the BSE 500 pack.
The chief reason for their bias for blue-chips is liquidity. The lower liquidity in smaller companies makes it expensive for foreign investors to buy into such companies or exit them.
BSE 500 companies account for more than 90 per cent of the exchange's overall market capitalisation and contribute more than 75 per cent to the overall volumes, show exchange data.
In the past five years, FPIs have cumulatively bought Indian equities worth Rs 3.55 lakh crore, as per depository data.
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