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Retail investors have always been accused of buying high and selling low, and jumping in and out of markets at exactly the wrong time. But times are changing. At least a section of the investors is showing maturity while dabbling in the markets.
In their roller-coaster ride with the stock of Punjab National Bank (PNB), they have accumulated shares at lows and booked profits at highs. The stock of Punjab National Bank has been facing a bear hammering lately after revelations of over an ₹11,000-crore fraud. After the recent decline to ₹120.60, the stock has corrected almost 50 per cent from its high of ₹231.60 registered on October 26, 2017.
Volatile counter
The stock has been highly volatile in the last year. Hovering at ₹120 at the start of 2017, it climbed to around ₹150 at the end of March 31, again slipped to ₹137 by June end and climbed to a high of ₹213.6 before closing the year at ₹171. In the previous calendar year 2016, the stock had witnessed a secular fall from a high of ₹220 in January to ₹110 by December.
But retail investors handled these ups and downs well. At the end December 2015, 3.46 lakh small retail investors (value of holding less than ₹2 lakh) were holding 4.50 per cent stake or 8.80 crore shares in the bank. As the price fell throughout 2016, the number of retail investors increased to 3.9 lakh and their stake rose to 4.72 per cent (or 10.04 crore shares). PNB shares hit a low of almost ₹70 in May 2016. When the price climbed in January-March 2017, some 32,000 retail investors booked profits. But retail investors stayed put when the stock was hovering in a narrow range during April-September 2017.
Savvy exit
When the government, in October 2017, announced its mega recapitalisation plan to infuse ₹88,100 crore into PSU banks, PNB’s stock had jumped to a high of ₹231.45 and closed the December quarter at ₹171.4.
While mutual funds and LIC bet heavily on PNB then, 20,000 savvy retail investors exited by booking profits. Currently, 3.4 lakh retail investors are holding 3.52 per cent stake (or 8.5 crore shares) in PNB.
On the other hand, LIC increased its stake to 13.93 per cent as of December 31, 2017. Among the mutual funds, HDFC Mutual Fund has the largest exposure of 4.21 per cent stake in PNB in the total MF holding of 8.76 per cent. Around 167 foreign portfolio investors are holding 12.56 per cent stake in PNB, with Lazard Emerging Markets Equity Portfolio holding 2.21 per cent. Lazard Emerging has been consistently pruning its stake in PNB.
In other counters too
The behaviour of retail investors has been almost the same in the case of RCom, JP Associates, Reliance Power and GMR Infrastructure — ie, exiting at higher levels.
Now, what remains to be seen is how well smarter institutional investors — LIC, MFs and FIIs — adapt to the volatility, though each will have their own objectives.
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