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Retail investor interest waning in top companies

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Exit comes in the wake of a rally in equity prices.

K. S. Badri Narayanan

Chennai, Jan. 30

Nearly 60 per cent of the top listed companies have registered, as of December 2009, a decline in the retail investor (holding less than Rs 1 lakh in nominal value of paid-up capital) population compared with three months earlier (September 2009). An analysis of the data on shareholding pattern of the companies that make up the BSE 500 index during this period reveals this.

Metals, power, banking and information technology are the principal sectors from which retail investors have moved away.

The declining retail investor interest in top listed companies is, however, not a new phenomenon but the trend has accelerated in recent times. For instance, while only 55 per cent of the BSE 500 showed a decline a year ago (December 2008), it was 61 per cent in the latest quarter.

The market remained flat during the quarter ending December 2009 but the period between April and October saw it flare up sharply. The Sensex gained 114 per cent from the lows of March and closed calendar 2009 with a gain of 81 per cent. The retail investor exit thus comes in the wake of a rally in equity prices.

Major buyers

Only FIIs (foreign institutional investors) were the major buyers in the December quarter. They increased their stake in more number of companies, even as mutual funds exhibited less enthusiasm in hiking their holdings. Promoters' holding, in fact, decreased.

PSU Stocks

The analysis also revealed that retail investors appear to have lost fancy for PSU stocks. This comes at a time when the Government is planning to lure the retail segment with a discount to the offer price meant for large institutional investors.

Of the 48 stocks in the BSE PSU Index, 35 witnessed a drop in retail interest while 11 saw an increase.

Small investors cut stake in companies such as NTPC, SAIL, PowerGrid, Rural Electrification, PTC India, Neyveli Lignite, Power Finance Corporation, BHEL, Petronet LNG and GAIL India.

The number of individual investors exiting from these companies range from 1,400 to as high as 51,000.

The banking sector, which witnessed a sharp surge last quarter, also saw profit booking by retail clients. YES Bank, Central Bank, Dena Bank, Bank of India, Union Bank, UCO Bank, Canara Bank, Allahabad Bank and Syndicate Bank witnessed individual investors leaving.

Retail shareholders also decreased stake in IT majors — Infosys, Wipro, TCS and Tech Mahindra and, ADAG group cos — Reliance Power, Reliance Infra, Reliance Capital; and Tata group companies Tata Steel, Tata Steel, Tata Power, Tata Tele (M) and Tata Chemicals.

Hiking stake

Realty and telecom sectors attracted higher retail participation during this period. Of the 14 BSE realty stocks, nine saw retail interest going up while five saw a decline. Bharti Airtel saw over two lakh investors entering. Reliance Communication and Idea Cellular also witnessed retail clients' stake going up.

Reliance Industries, Educomp, JP Associates, JP Power Ventures, Suzlon and DLF were the other prominent companies that were lapped up by individual investors.

Favourites

Both A-DAG and M-DAG groups' stocks still seemed to be the most favourite for retail investors.

Reliance Power has the largest small investors' base of 35.76 lakh followed by Reliance Industries (35.23 lakh), RNRL (25.32 lakh), Reliance Communications (21.6 lakh), Reliance Infra (14.92 lakh) and Reliance Capital (13.01 lakh) as of December-end.

Related Stories:
‘There is no margin of safety at the current levels'
‘Upside in large-cap stocks is limited from here on'

(This article was published in the Business Line print edition dated January 31, 2010)
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