Back to buying, retail investors up holding in 190 top firms

If Foreign Institutional Investors led the market charge before the general elections, it is retail investors who have been more bullish after the polls. Retail investors raised their holdings in 190 of 360 leading companies between end-June and end-September, based on the latest data on shareholding patterns.

This is in contrast to the trend during the September 2013 to June 2014 period, when retail investors reduced their holding in three out of five companies. “Many investors used the earlier rally to sell and are now regretting it,” says V Nagappan, Advisory Committee Member at Madras Stock Exchange.

Retail investors loaded up on sectors such as real estate and banking that were expected to benefit from falling interest rates. Sobha Developers and Indiabulls Real Estate, for instance, saw their retail holdings rise by 0.5 percentage point and 1.9 percentage points respectively over the last quarter. Among the banking stocks, retail holdings in Dena Bank and Canara Bank climbed by 1 percentage point.

Sectors such as infrastructure and power generation continued to attract retail buyers, betting on economic revival. Retail investors shored up stakes in infrastructure majors such as GMR, Jaypee, Torrent Power and Tata Power. Nagappan says small investors are looking for value buys and feel these stocks are ‘cheap’.

However, retail investors seem to have tired of defensive large-cap holdings in IT and pharmaceutical stocks. So, while they reduced exposure to Cadila Healthcare and Cipla, they picked up Strides Arcolabs and Ipca Labs.

The mid-cap flavour was also in evidence in the IT sector, with retail investors stocking up on Mphasis and Geometric even as they pruned holding in Infosys, Wipro and Tech Mahindra.

In sharp contrast, FIIs cut holdings in sectors such as realty, infrastructure and banks. In the infrastructure sector, they reduced their position in five out of the six companies that retail investors bought. Even in many individual stocks, their views differed. In around 100 companies, retail investors bought shares while FIIs liquidated their holdings over the September quarter.

The overall stakes held by retail investors in the listed stocks inched up from 5.7 per cent to 5.8 per cent over the quarter ended September 30, 2014. With retail investors also betting big on equity mutual funds, their mutual fund holdings in the market went up from 3.5 per cent to 3.7 per cent.

“Contrary to our expectation, retail investors did not come in a big way” says S Venkateswaran, Partner at Maconochie, a stock broking firm. “But those who are on the sidelines waiting for a correction could enter in the next two quarters”.