How to use the Smart Money Buying scanner?
This scanner gives you a list of Indian stocks where domestic & foreign institutions are increasing their stakes. Let’s learn more about the filters used:
Market Capitalization
We will limit ourselves to large-cap and mid-cap stocks using a market capitalization filter of more than 10,000 crores. If you want to check for smart money when buying small-cap stocks, you can use a filter of market capitalization of more than 5,000 crores. However, note that investing in small caps entails its own set of risks.
Domestic Institution Holdings
These are investments made by local financial entities such as banks, mutual funds, and insurance companies in Indian securities. These institutions, with their deep understanding of local markets, bring stability and liquidity. In this scanner, we focus on companies where domestic institutions have increased their stake from the last quarter. This increase signifies the confidence of knowledgeable and influential local investors, which can drive demand, support stock prices, and signal to other investors that the stock is a strong investment, potentially leading to further price appreciation and stability.
Foreign Institution Holdings
These are assets or securities owned by non-domestic entities. Such holdings offer diversification to investors by accessing markets beyond their home country, potentially mitigating risks associated with local economic fluctuations. This scanner focuses on companies where foreign institutions have increased their stake in the last quarter. This increase is a positive indicator for stock prices, highlighting the strong confidence of international investors in a company’s prospects. It can lead to increased demand for the stock, boost its price, and often reflect favorable economic conditions and stability, attract more investments, and foster a positive market sentiment.
Example Trade
This scanner gave the name on stock Zomato Ltd. on 1st Jan 2024 as both FII and DII increased their stake in the last quarter. From 1st January 2024 to 25th June 2024 this stock gave a return of more than 67% in just 6 months.
Don’t forget
- This is a first-level filter aimed to give you a good starting point in your search for the lists of large and mid-cap Indian stocks showing increasing promoter interest. You need to analyze the valuation, financial strength, and management quality among other aspects to ascertain if they are good businesses and command a seat in your investing portfolio.
- High holdings by institutions can lead to market volatility if they rapidly buy or sell large quantities, and it reduces stock availability for individual investors.
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Frequently Asked Questions
What does 'smart money' mean?
The Relative Strength Index (RSI) is a momentum oscillator traders use to measure the speed and change of price movements. It ranges from 0 to 100, with values above 70 indicating overbought conditions and below 30 indicating oversold conditions. The RSI helps identify potential buy or sell signals and trend reversals based on market momentum.
Should I just follow what the institutions ike FIIs and DIIs are doing?
FIIs and DIIs are professional investors and decide to allocate their funds to different stocks after thorough research and analysis. While we take ideas from them, we are banking on their capabilities and thesis. This is a good idea generation method. But as we have said before, do your own research to determine if stocks listed in this scanner are suitable for your goals and investing style.
How can I learn more about investing in the right stocks?
Upsurge.club offers a range of courses on investing where you can learn everything from the basics to advanced strategies and idea generation methods. You can find them here.