News Analysis

Retail investors lose around ₹3 lakh crore in market crash

Rajalakshmi Nirmal BL Research Bureau | Updated on March 25, 2020 Published on March 24, 2020

Burnt their fingers bottom-fishing stocks shunned by institutional investors

Retail investors are bearing the brunt of the market correction. Since the beginning of the year, retail investors in stocks of Nifty 500 have lost almost ₹3 lakh crore. The value of their holding stands at ₹8.85 lakh crore now.

These small investors had been queuing up to buy stocks and load their equity portfolio all of last year: In the beginning of 2019, their holding in the market was 6.5 per cent, which by end of the year hit 8 per cent. Further, on analysing the shareholding pattern of listed stocks, BusinessLine also finds that many of the bets of retail investors have gone wrong, with their stocks being hit worse than the market.

 

While the Nifty 500 index has fallen 27 per cent since December, many stocks where retail holding had increased significantly in the last one year have seen severe price correction.

Wrong stock bets

Stocks that witnessed significant increase in retail holding in 2019 include Dewan Housing Finance, PC Jeweller, Jain Irrigation, South Indian Bank, Sterlite Technology, BSE and Ujjivan Financial Services. In all these stocks, retail holding has increased by five percentage points or more between December 2018 and December 2019 as per shareholding data with the exchanges. These stocks have seen price correction of 30-60 per cent.

In most of these cases above, institutions have exited en masse.

In PC Jeweller, for instance, foreign institutional holding has dropped from 13.5 per cent to 5.6 per cent between December 2018 and December 2019. Similarly, in Dewan Housing Finance, the foreign portfolio holding has dropped from 22.25 per cent to 6.45 per cent. The same is the case with Jain Irrigation too, where FPI holding has dropped from 31.45 per cent to 18.35 per cent.

While in Dewan Housing Finance, it was a financial scam, in PC Jeweller, there were corporate governance issues, but unmindful of these, retail investors tried bottom-fishing and burnt their fingers.

Significant loss in retail investors’ portfolio (from Nifty 500 index), however, was from three stocks, and all of them are Anil Ambani’s businesses. Reliance Infrastructure was among the most popular stocks with retail investors last year. This stock, which was trading at around ₹300 in December 2018, dropped to ₹30 in December 2019 and is at ₹10 now. Retail investor holding in this stock has increased from 9.55 per cent in December 2018 to 34.68 per cent in December 2019. Similar has been the case with Reliance Capital — but this stock has plunged even more sharply. It has lost 98 per cent since December 2018. Reliance Power too let down its investors by dropping from ₹29 to under ₹2 now.

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Published on March 24, 2020
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