With the backing of retail investors, several smallcap stocks may have rocked on Dalal Street over the last one year, but some of them failed to sparkle because of being ditched by the big bulls.

ETMarkets found nine stocks that were dumped by both foreign institutional investors and mutual funds in each of the last three quarters of FY24, which weighed on their performance.

Of the nine stocks, six of them have given negative returns in the last one year.

Automobile Axles, Tarsons Products, TCNS Clothing, and VIP Industries are among the nine stocks which saw consistent selling by both FIIs and MFs, and they saw a double-digit fall in the last one year.

In Automotive Axles, MF holding came down to 11.60% at the end of December quarter, from 12.94% at the end of March quarter. FIIs also brought their stake to 0.63% in four quarters from 0.73%. This stock has shed nearly 12% in the last 1 year.

In Tarsons Products, MFs significantly reduced their holding in the last three quarters, and so did the FIIs. While MF holding came down to 2.15% in the December quarter from 7.64% in March quarter, those of FIIs reduced to 6.83% from 9.16%. This stock gave negative returns of over 22% in the last one year.

Travel bags maker VIP Industries was also dumped by both FIIs and MFs in the current financial year, which weighed on the stock performance. FII holding was down to 7.5% in December from 9% in March last year. Meanwhile, MF ownership dropped to 10% from 14.35% in three quarters. Shares of the smallcap firm have corrected more than 11% in the last one year.

Meanwhile, Shaily Engineering Plastics is the only one among the nine stocks to give multibagger returns in the last one year despite consistent selling by both MFs and FIIs. Mutual funds holding in the stock, which has given 149% returns in the last 1 year, was down to 10.4% in December quarter, from 11.8% in March quarter. FII ownership fell, although marginally.

What should investors do?

Over the last few months, money managers have been apprehensive about the frothy valuations of smallcap stocks and the unfavourable risk-reward in the backdrop of global uncertainties.

Many of them have even recommended switching to largecap stocks as risk-reward has turned favourable for this pack.

“There is a clear shift and tilt towards mid and small cap funds away from large cap funds, basically. So that is definitely putting pressure on the fund managers to kind of keep finding the right ideas or allocating more to the same at higher valuation,” said S Krishnakumar, director, Lion Hill Capital.

“..I would think that given the kind of growth that is seen at this point in time, valuations are expensive in most pockets in mid and small caps. And one would probably do better to kind of book some profits and be ready for any good correction to add into them again,” he added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)