FII Selling: Don’t dismiss as a lost cause

Stocks with large FII holdings

Hold on to quality stocks, even if they get decimated in this market as FII selling this time around has been more due to the liquidity crunch.

ot so long ago, FII interest in a stock was seen as a reason to add it to your portfolio. Now, with marquee names in the investment banking business — Merrill Lynch, Lehman Brothers, Morgan Stanley and Goldman Sachs — engulfed by the credit crisis, a sizeable holding by one of these crisis-ridden institutions is seen as a red flag.

The alacrity with which “Lehman” stocks have been pummelled to single-digit valuation multiples over the past few weeks and the widely circulating lists of ‘Lehman’, ‘Merrill’ and ‘Goldman’ stocks on blogs and investment groups force you to ask if you should stay well away from stocks fancied by these institutions. Given the ‘across-the-board’ selling by a few FIIs, should you give stocks with sizeable FII holdings a wide berth, moving, instead, to stocks with low or negligible FII interest?

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