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Against their 52-week lows, the BSE small-cap and mid-cap indices have rallied 97 per cent and 79 per cent, respectively. However, retail participation has been a concern, with investors booking profits on every rise in the markets. Their average stake in Indian companies hit a decade-low in June, data showed.
Individual shareholders’ aggregate holding in top listed companies, including BSE 500, mid- and small-cap companies, fell to 7.77 per cent in the June 2014 quarter, the lowest since December 2001. Their stake stood at 8.1 per cent in the March 2014 quarter and 8.12 per cent in the December 2013 quarter, showed Capitaline data.
Data compiled by BSE and the National Stock Exchange suggest so far this year, investors (retail and high net worth individuals, or HNIs) net-sold to the tune of Rs 17,394 crore in the cash segment. Since June 2013, they have net-sold equities worth Rs 24,517 crore, data show.
“Retail investors sold ahead of the elections in the first half of 2014. Uncertainty on the macro-economy was another factor due to which investors sold at every rise. However, things have changed post elections and we have seen fairly good inflows from the retail segment in the last couple of months,” said Vaibhav Sanghavi, director (equities), Ambit Investment Advisors.
The shareholding data for 723 companies from the BSE-500, mid-cap and small-cap indices for the June 2014 quarter show through the past year, retail investors pared their stake in 462 companies. These companies have recorded average returns of 43 per cent, compared with 41 per cent returns recorded by the remaining 261 companies during the same period.
Rikesh Parikh, vice-president (equities), Motilal Oswal Securities, said retail investors who invested substantially or had previous holdings might have sold if they got a good bargain. Uncertainty on the general elections earlier this year might also have been a reason for retail investors to book profits, he added.
Gautam Chhaochharia, head (India research), UBS Securities India, says the markets might see consolidation after the run-up, adding significant downside might be limited. He is bullish on equities, as current valuations aren’t high and hope of a recovery in growth will likely ensure premium valuations. “Our Nifty target for 2014-end is 8,000 and we remain overweight on financials, oil and gas, power/infrastructure/ industrials, telcos and media. We remain underweight on consumption (staples, discretionary), autos (two-wheelers) and pharma stocks,” he said in a recent report.
Parikh believes this isn’t the time to exit. He feels while making a fresh investment at current levels, investors should look at a longer time-horizon. A new government at the Centre could have far-reaching consequences, he adds.
Sanghavi says, “I think the retail segment’s overall interest in the markets is increasing, and will rise if the markets maintain their momentum. HNIs who had a significant allocation to debt and real estate in the past few years are now looking to increase their allocation to equities, as percentage of their total portfolio. We are seeing a revival in interest across segments.”
