Companies that have done buy-backs have also seen retail shareholders taking that route to cash out
Stock markets may be on a song, but retail shareholders seem to be cashing out.
A DNA Money analysis of top 50 most valued listed companies in the country shows as many as 22 stocks have seen a drop in respective retail shareholder count in the latest quarter.
Simply put, the number of retail shareholders has gone down in 22 of these 50 companies at a time when markets have done relatively okay. The number of direct investors, falling in the retail category, has dropped in blue-chips like ICICI Prudential Life, TCS, Reliance Industries, L&T and Axis Bank. Experts caution that retail shareholders often sell at a wrong time, and upward price movement in stocks sold could be a cause for heartburn.
India's top 50 companies represent the most popular and biggest firms, spanning across all types of sectors. Since they are the biggest, tracking retail shareholder count shows the mood of these investors. In 90% of cases, the number of public shareholders has fallen in these 22 companies. The analysis shows that the decline in number of public shareholders is always accompanied by retail shareholders, defined as those holding share capital up to Rs 2 lakh. For instance, ICICI Prudential Life saw the number of public shareholders dropping by 61,758 in June quarter compared to March quarter. This drop can be entirely explained by the drop in retail shareholder number by 61,724 from 430,866 to 369,142.
Companies that have done buy-backs have also seen retail shareholders taking that route to cash out. TCS, which had a buyback price of Rs 2,850 per share, saw retail shareholder count at the end of June quarter declining by 38,000. TCS buyback was conducted between May 18 and May 31.
Reliance Industries, India's largest firm by market value, also saw a dip in retail shareholder count. Over 37,000 retail shareholders exited the popular stock in June quarter, but they may have missed the uptrend since then. RIL shares ended at Rs 1,381.65 in June end but went up to Rs 1,625 apiece till September 6 before the 1:1 bonus issue took effect. The wrong moves by retail investors often is the reason why they make losses. Other top stocks that saw retail shareholder count dropping by at least 10,000 in June quarter include L&T (down 29,409), Axis Bank (29,203), Tata Steel (25,613), Bharti Airtel (18,385), Power Grid Corp (14,316), Adani Ports (12,873) and HUL (10,201).
"The drop in retail shareholder count could be due to profit-booking in positions where they made money, or selling linked to outlook not being exciting. Outlook reports from brokers give a picture to retail investors, who happen to be highly broker driven in their actions," said Vikas Gupta, CEO & chief investment strategist, OmniScience Capital.
Other stocks among top 50 companies that witnessed a drop in the number of retail shareholders include UltraTech, Bosch, Titan, Nestle, HCL Tech, Asian Paints, Hero Motocorp, Bharti Infratel, ICICI Bank and NTPC.
Many experts feel that without a proper strategy, retail investors are likely to take wrong decisions. They sell when their stocks rise by 20-30%, while they hold on to losers and keep on buying them as they go lower. "With massive size and pace of wealth creation, markets have become too institutionalized that puts individual investors at a disadvantage both on information and analysis fronts. I believe individual investors are better off holding a portfolio of funds, and not a portfolio of stocks today," said Raamdeo Agrawal, chairman, Motilal Oswal Asset Management Co.
On the other side of the spectrum, 28 of the 50 companies saw a hike in individual retail shareholder count. The companies that saw a sizeable rise in the number of retail investors include Vedanta, SBI, Sun Pharma, Coal India, ONGC, Tata Motors, Yes Bank, Hind Zinc, Infosys, Wipro, HPCL and Maruti Suzuki. "Pharma and IT are some of the beaten-down sectors in the market today. Some PSUs like Coal India and SBI have seen price correction or have stayed flat so it's no surprise that some retail investors have tried to seek value," said a veteran fund manager, who is not authorised to publicly speak on stocks he owns.
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