One would not be entirely wrong in saying that retail investors tend to have a love-hate relationship with foreign institutional investors (FIIs). They love it when FIIs buy into stocks that are owned by them. And would of course dislike it when FIIs exit such stocks! After seeing an outflow of Rs 27 bn in CY11, FIIs' inflow into equities stood at whopping Rs 1.3 trillion during CY12. According to the Economic Times, FIIs have significantly reduced stakes in companies whose financial performance has not been up to the mark. Instead, they seem to have favored large caps. Given the overall uncertainty that has been surrounding the economy and broader markets over the past year, this seems like a good strategy. However, we believe that one must also keep a close eye on the broader valuations. Currently, good quality stocks are not cheap. And they haven't been for a while now! With FIIs favoring such stocks, the overall expectations also would have risen. This could possibly make large caps volatile especially in cases of the financial performances failing to meet expectations. 

                                                               Courtesy:- Equity Master