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Market looks tempting? Don’t bat on front foot yet; here’s why

Analysts say investors should not rush to buy but keep some cash ready.

, ETMarkets.com|
Updated: Feb 27, 2019, 12.45 PM IST
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December quarter shareholding data shows individual investors gradually increased stake in as many as 97 stocks in the BSE500 index in the first nine months of financial year 2019.
Analysts said ‘buy on dips’ and retail investors went on accumulating many of the beaten-down stocks throughout Calendar 2018.

While a handful of stocks did deliver good returns to investors, but a majority of them actually tanked further over the past two months.

December quarter shareholding data shows individual investors gradually increased stake in as many as 97 stocks in the BSE500 index in the first nine months of financial year 2019. Only 10 of them have logged gains, some up to 92 per cent in this period.

Among the most favoured stocks, individual investors held over 46 per cent stake in Nocil as of December 31, 2018, up from 44.37 per cent at the end of March 2018. The stock fell 9 per cent in 2018 and 24 per cent in 2019 so far. Brokerage Way2Wealth has a 'Buy' rating on Nocil with a price target of Rs 195.

The South Indian Bank and Suzlon Energy are two other players where investors increased stake from below 40 per cent at the end of March 2018 to above 40 per cent by December. The stock declined up to 50 per cent.

It’s the same story with PC Jeweller and Manpasand Beverages, which tanked over 75 per cent in 2018, and 14 per cent and 28 per cent, respectively, so far in 2019. Individual investors raised their stakes on the two counters during April-December 2018.

Anil Ambani’s Reliance Power also drew individual investors’ interest through the year and their holding rose to 12.74 per cent at the end of December quarter 2018 from 12.49 per cent at the end of March 2018. The stock declined 43 per cent in 2018 and 60 per cent so far this year.

However, Reliance Nippon – another retail investors’ favourite of 2018 – has delivered some 25 per cent this year after having slipped over 45 per cent between January and December 2018.

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Beaten-down Tata Motors saw retail buying on every dip in 2018 and individual investors’ stake increased to 10.81 per cent by the end of December from 7.38 per cent at the end of March, 2018. The stock tanked 60 per cent in 2018, but has since gained over 1 per cent in 2019 so far.

The auto firm recently reported its biggest-ever quarterly net loss of Rs 26,960.8 crore for December quarter. Brokerage Sharekhan is cautious on the stock due to subdued earnings and weak management commentary. It has advised investors not to bottom-fish on the counter.

Market participants should adopt a stock-specific approach while going for a buy-on-dips strategy, says Umesh Mehta, Head of Research, Samco Securities.

“Given that the midcaps have been beaten black and blue, but they always draw retail investors’ attention. I think at this point time you have to not just balance midcaps but also keep an eye on the forthcoming events and play safe,” says Dilip Bhat, Joint MD, Prabhudas Lilladher told ETNow.

“If you are getting Maruti or M&M 35-40 per cent lower from their highs, consider them because you are getting good stocks at reasonable valuations,” he said.

Investors increased their holdings in Maruti Suzuki to 4.21 per cent in December 2018 from 3.47 per cent in March. The stock tanked 23 per cent in 2018 and another 7 per cent in 2019 till February 22.

With 31 per cent holding, individual investors also remained bullish on VA Tech Wabag. But shares of Chennai-based Indian multinational company slipped 39 per cent in 2018 and 16 per cent in 2019. Cholamandalam Securities has a price target of Rs 308 on the stock.

However, Merck, Jubilant FoodWorks, L&T Technology Services, MphasiS, Britannia, VIP Industries and SRF worked for investors during this period, with the shares rallying between 9 per cent and 92 per cent since April 2018.

Yes Bank, Dewan Housing Finance, Asian Paints were also on the list of 38 stocks where individual investors increased their holding in the past two quarters.

Analysts say investors should not rush to buy but keep some cash ready. It is one of those phases where you neither bat aggressively on the front foot nor go on the back foot. It is important to preserve your resources, says Jagannadham Thunuguntla, Senior Vice President and Head of Research, Centrum Broking told ETNow.

“There are a number of events lined up and the volatility they create will provide lot of opportunities over next three to four months to build a portfolio for next three to four years,” he said.


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