Whalesbook
Market Downturn and DII Strategy
Geopolitical developments have rattled Indian equities, with the Nifty 50 sinking approximately 1.8% and the BSE Sensex tumbling over 3.5% in the past week. The broader market fared worse, as the Nifty Microcap 250 index saw a sharp decline of around 5% over the same period. This benchmark has been under pressure since mid-June 2025, falling from its peak near 24,750 to its current level of 20,484. Despite this subdued investor sentiment, domestic institutional investors (DIIs) are demonstrating a pronounced interest in select microcap stocks.
Ujjivan Small Finance Bank: Financial Inclusion Driver
Ujjivan Small Finance Bank Ltd. experienced a significant increase in DII stake by 8.54 percentage points during the October-December quarter, bringing their total holding to 28.7%. The bank, focused on financial inclusion, reported a robust 21.6% year-on-year growth in its gross loan book, reaching ₹37,057 crore. Quarterly disbursements hit an all-time high of ₹8,293 crore. Expansion in microbanking, individual loans, and affordable housing portfolios were notable. The MSME loan book surged a remarkable 69% year-on-year. Financially, revenue climbed to ₹1,752 crore from ₹1,591 crore, while net profit jumped 71% to ₹186 crore. Its Return on Equity (ROE) stands at 12.4%, exceeding the industry median of 10.4%. The stock trades at a Price-to-Earnings (PE) ratio of 22.4x and a Price-to-Book Value (PBV) of 1.7x, slightly above industry averages.
Tega Industries: Global Ambitions via Acquisition
Tega Industries Ltd., a leading manufacturer of critical mining consumables, saw DIIs raise their stake by 7.9 percentage points to 18.6%. The company raised ₹1,713 crore via preferential allotment, primarily to fund its acquisition of Molycop, a global supplier of grinding media. This strategic move positions Tega for international market entry and access to Molycop's extensive global mine network and manufacturing facilities. While sales saw a marginal decline from ₹409 crore to ₹404 crore, profits significantly dropped from ₹54 crore to ₹20 crore in Q3FY26. However, its Return on Capital Employed (ROCE) at 17.8% remains marginally above the industry median. The stock's valuation is steep, with a PE of 64.5x and a Price/Earnings to Growth (PEG) ratio of 3.3x, both substantially higher than industry medians.
Thyrocare Technologies: Diagnostic Chain Expansion
DIIs increased their holding in diagnostic chain Thyrocare Technologies Ltd. by 7.1 percentage points, reaching 20.5%. The company reported a 14% year-on-year growth in patients to 4.5 million and a 22% increase in tests performed to 49.6 million in Q3FY26. Its franchise network expanded by 12% year-on-year. Revenue grew 17.9% to ₹196 crore, with net profit soaring 75% to ₹28 crore. Although its ROCE of 24.8% is slightly below the industry median of 25.3%, Thyrocare offers a dividend yield of 1.9%. The stock trades at a premium valuation with a PE of 41.4x.
Entero Healthcare: MedTech Consolidation
Entero Healthcare Solutions Ltd., a healthcare product distributor, attracted DII investment, with stake rising by 6.8 percentage points to 16.4%. The company bolstered its presence in the MedTech space through three acquisitions in Q3FY26. Management anticipates MedTech revenue to surpass ₹1,000 crore in FY27. Sales grew 25.6% year-on-year to ₹1,706.5 crore, and profit increased 15% to ₹34 crore. Its ROCE stands at 8.7%, slightly below the industry median. However, the stock trades at a PE of 39.1x, below the industry median, and a PEG ratio of 0.5x, suggesting it may be undervalued relative to its growth prospects.
Privi Specialty Chemicals: Aroma of Growth
Privi Specialty Chemicals Ltd., a major producer of aroma chemicals, saw DII stake increase by 5.7 percentage points to 10.3%. A key development was the commissioning of Prigiv, a joint venture with Givaudan, which achieved positive EBITDA during the quarter and is expected to contribute to net profit in FY27. Sales rose 23.2% year-on-year to ₹605 crore, with profits surging 76% to ₹75 crore. Its ROCE is 16.4%, higher than the industry median. The stock is valued at a PE of 37.7x and a PEG ratio of 1.5x, indicating a premium valuation.
Navigating Volatility
While DIIs' selective accumulation in microcaps points to sectoral tailwinds and strong fundamental potential, the current geopolitical climate necessitates caution. Investors interested in these stocks are advised to add them to their watchlist for now.