Defying the popular perception of a muted retail investor interest over the past couple of years, India’s universe of listed companies has added 6.6 million new, small shareholders since September 2010. Of these, over four million were added by the top 100 companies.
In the first analysis of its kind, BS Research Bureau aggregated small shareholders’ data reported by 3,707 companies listed and trading actively on the Bombay Stock Exchange (BSE). The exercise showed the total number of shareholders with holdings of Rs 1 lakh or below swelled from 96.6 million in September 2010, when the BSE Sensex was nearing its peak hovering around the 20,000-mark, to 103.2 million at the end of December 2011. Interestingly, despite this addition, the index lost 23 per cent during the period, ending near 15,500 at the end of December 2011.
To be sure, this increase does not represent the number of new individuals that entered the market during the period, because one individual shareholder can invest in any number of listed companies, making him a shareholder in each of those firms. For example, if a person buys stocks in 10 firms, the shareholder base swells by 10. The number of demat accounts in the country’s top depository National Securities Depository Ltd, which is a better indication of new entrants, also showed an increase of around 1.1 million new accounts from 10.8 million in September 2010 to 11.9 million now. Thus, while new investors are entering the market, existing ones are buying more stocks in different firms.
Analysts say the numbers are surprising as the broad market perception was that the retail investors had deserted the market since the crash of 2007-08.
“The data are surprising. What we have seen in the last couple of years is that clients are only trickling into the retail broking space. We are nowhere near the kind of interest we saw in 2007,” said Satish Menon, director (operations), Geojit BNP Paribas Financial Services. “One possible explanation could be that small investors are diversifying. They are exiting dud stocks and taking positions in two or three good stocks,” Menon added.
The analysis showed these investors have preferred large-cap names outside the Sensex after the index hit a peak in late 2010. While Sensex firms attracted 1.2 million new shareholders, BSE 100 companies outside Sensex attracted maximum interest with 2.8 million new shareholders, a gain of 13 per cent. Companies number 101 to 200 added 1.2 million or 12 per cent new shareholders.
Some analysts say this could also mean retail investors have used the market-fall to bottom-fish stocks and expand their portfolio. Another possible explanation could be that high networth investors who held portfolios larger than Rs 1 lakh have been relegated to this category, due to the fall in the market during the period.
| THE MORE THE MERRIER Individuals holding nominal share capital of up to Rs 1 lakh | ||||
| (In Number) | Company count | Sep-10 | Dec-11 | % change |
| Sensex* | 29 | 13,282,709 | 14,509,251 | 9.23 |
| BSE 100 | 70 | 21,597,201 | 24,450,708 | 13.21 |
| BSE 200 | 100 | 10,609,156 | 11,868,007 | 11.87 |
| BSE 500 | 281 | 13,528,646 | 14,698,394 | 8.65 |
| Small cap | 377 | 8,039,913 | 8,163,168 | 1.53 |
| Rest | 2,850 | 29,581,852 | 29,572,032 | -0.03 |
| Total | 3,707 | 96,639,477 | 103,261,560 | 6.85 |
| Source: Capitaline Compiled by BS Research Bureau *Coal india was listed in November 2010 | ||||
Sandip Sabharwal, chief executive officer, portfolio management services, Prabhudas Lilladher, said, “The mid-cap indices had lost close to 50 per cent during the period. Many individual stocks must have fallen even more. This could have increased the number of investors holding below Rs 1 lakh (worth of shares). Actually, not many new people have come into the market in the past two years.”
More From This Section
While this is true to some extent, the number of investors that can be added in this manner cannot be substantial, say some analysts, because the number of small investors is just a few lakhs, while the number of high net-worth investors are only a few thousand.
For example, in Tata Steel, the number of individual shareholders holding less than Rs 1 lakh worth of shares stood at 846,620 in September 2010. The number of individuals holding over Rs 1 lakh worth of shares was just 1,169.
However, by the end of December 2011, number of small investors in Tata Steel had crossed one million, while the number of richer investors dropped to 1,162.
Small shareholders did not prefer companies outside the BSE small cap space. These companies actually showed a marginal decline in small shareholders. This category lost 9,820 small shareholders during the period.