March 2026 will be remembered in the history of the Indian financial markets.
During the month, foreign institutional investors (FIIs) offloaded around ₹60,000 crore worth of financial sector stocks, triggering a sharp correction in the Bank Nifty.
That’s just the selling in the financial sector…in one month.
But if you look at the overall trend, FIIs pulled out more than ₹1.12 trillion from Indian equities, making it one of the sharpest monthly outflows in recent years.
While all this was happening, a few FIIs quietly took a contrarian call and continued to buy Indian equities. Interestingly, their focus was small-cap stocks.
During the Jan-March 2026 period, several small companies received interest from foreign institutional investors.
In this editorial, we will look at four small-cap stocks that were bought by FIIs in the March 2026 quarter.
In the December 2025 quarter, the company’s FII holding was 3.36% that has increased to 5.77% as of March 2026.
Shringar House of Mangalsutra designs, manufactures, and markets a wide range of mangalsutras in 18k and 22k gold, studded with American diamonds, cubic zirconia, pearls, and semi-precious stones.
It holds close to 6% share of the organized mangalsutra market in India. Its product portfolio spans 15+ collections and 10,000+ SKUs, catering to weddings, festivals, anniversaries, and daily wear.
It operates on a pure B2B model and serves corporates, wholesalers, and retailers across India and select international markets, without any direct-to-consumer sales.
The company has a manufacturing facility in Maharashtra with 2,500kg annual capacity, supported by 22 designers and 166 karigars.
Coming to its financials, the company’s sales and net profit have grown at a compound annual growth rate (CAGR) of 21% and 45%, over the past three years.
During the same period, its RoE and RoCE have averaged 25% and 36%, respectively.
During the recent earnings call, its management stated they have received approval to shift its manufacturing facility to a larger space in Mumbai to increase capacity, technology, and efficiency.
Moreover, it’s explicitly targeting bullion-neutral operations (i.e., profit derived from making charges/design mix, not gold price moves), using GML + exchange hedges.
On growth expectations, the management has guided for a 30% CAGR continuation.
In the December 2025 quarter, Granules India had an FII holding of 13.55%, which has now increased to 15.31% as of March 2026.
Granules started as a merchant exporter of bulk drugs like paracetamol, guaifenesin and chloropheniramine maleate.
At present, it manufactures APIs, pharmaceutical formulation intermediates (PFIs) and FDs, which are marketed to more than 300 customers across more than 80 countries.
It has manufacturing plants across Hyderabad, Visakhapatnam, and Virginia (US), and R&D centres in Hyderabad and Virginia.
Together, these have an installed manufacturing capacity of 39,360 TPA of APIs, 24,640 TPA of pharmaceutical formulation ingredients (PFIs) and 39.4 billion dosages of FDs.
Coming to Granules India’s financials, its sales and net profit have grown at a CAGR of 12% and 8%, respectively, over the past five years.
Its RoE and RoCE have been commendable during the same period, averaging 17% and 23%, respectively.
Over the years, the company has shifted its focus to new product launches, including limited competition products, especially in high-potential therapies like CNS, ADHD, oncology, and diabetes.
Going forward, this sustained new launches and its momentum is expected to aid in diversification and future growth.
In the previous quarter ended December 2025, FII holdings in Repco Home stood at 12.68%. This has now increased to 13.37% as of March 2026.
Repco Home was incorporated in 2000 as a subsidiary of Repco Bank, with its corporate office in Chennai. The company offers housing loans and mortgage loans to salaried and self-employed individuals.
It has a long track record in housing finance and an established franchise in South India, particularly in tier II and tier III cities.
Coming to its financials, Repco Home’s sales and net profit have grown at a CAGR of 5% and 9% over the past five years.
Its RoE averaged 12% during the same period.
The company’s asset quality has been on a steadily improving trend, supported by recovery efforts, including one-time settlement schemes.
Going forward, Repco Home’s ability to achieve and sustain significantly lower delinquency levels, similar to its peers, would be crucial.
In its recent earnings call, the management acknowledged fintechs and tech-led HFC models but argued its borrower profile requires field assessment, which is its speciality.
It’s revamping IT systems and making improvements to its end-to-end solutions, mobile app for collections, field investigations, sourcing, and API-based verification.
In the previous quarter ended December 2025, FII holdings in the company stood at 4.2%. This has now increased to 4.60% as of March 2026.
Sharda Cropchem is a fast-growing global agrochemicals company with a leadership position in the generic crop protection chemicals industry.
It has made inroads in the European and US markets, which are characterised as high-entry-barrier markets. It also has a significant presence in other regulated markets.
The company has an asset-light business model whereby it focuses on identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations through third-party distributors or its own sales force.
Coming to its financials, Sharda Cropchem’s sales and net profit have grown at a CAGR of 17% and 13% over the past five years.
Its RoE and RoCE during the same time have averaged 12% and 17%, respectively.
In the most recent quarterly earnings for the December 2025 quarter, its revenue increased by 39%. The agrochemical business grew 48% on-year, whereas the non-agrochemical business grew 8.1% on-year.
Going forward, the company has promising long-term prospects driven by its asset-light, export-oriented business model and strong global presence.
It benefits from rising demand for crop protection products amid increasing focus on food security and farm productivity worldwide.
However, its business is cyclical, influenced by seasonal demand, weather patterns, and global agrochemical pricing trends. So be mindful of that.
The March 2026 quarter will be remembered for the panic, the outflows, and the noise.
The fact that FIIs chose to accumulate small-cap stocks, an asset class typically considered higher risk, even as they were dumping large chunks of financial sector holdings, is worth paying attention to.
It signals a degree of conviction that goes beyond routine portfolio rebalancing.
That said, FII buying is a data point to be considered alongside other metrics. Foreign investors can and do exit positions just as swiftly as they enter them.
What matters more is whether the underlying business fundamentals of these companies justify the attention they are receiving.
Be sure to evaluate the company's fundamentals, corporate governance, and valuations as key factors when conducting due diligence before making investment decisions.
In smallcaps, timing, and research are everything.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com