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‘Value picks’ a costly affair as nine of 10 most retail-owned stocks sink up to 95%

“This trend has been observed across many cycles,” Hemang Jani of Sharekhan told ETNOW.

, ETMarkets.com|
Last Updated: Feb 24, 2020, 12.26 PM IST
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High retail holdings in these stocks as of December 31 suggest small investors still see value in them, even though fear of permanent de-rating of some of these stocks looms large.

NEW DELHI: The performance chart of top retail-owned stocks in the BSE500 pack paints a bleak picture: nine out of every 10 stocks have lost up to 95 per cent market value in last 12 months.

High retail holdings in these stocks as of December 31 suggest small investors still see value in them, even though fear of permanent de-rating of some of these stocks looms large.

Retail investors typically have a liking for low-priced stocks, and whenever they see a sharp selloff in a scrip, they tend to average the stock price, said Hemang Jani of Sharekhan.

“This trend has been observed across many cycles,” he told ETNOW in a recent interview.

Shares of YES Bank have plunged 84 per cent in last one year. The troubled private lender has the highest retail ownership in the BSE500 pack, with individuals investing up to Rs 2 lakh accounting for 43.7 per cent of its holding.

Retail holdings in two other banks, Karnataka Bank and South Indian Bank, stood at 42 per cent each, December end regulatory filings showed. Shares of Karnataka Bank are down 33 per cent while those of South Indian Bank 25 per cent in last 12 months.

Reliance Capital has plunged 95 per cent in past one year. Retail investors own 36.5 per cent of this NBFC.

Among others, DHFL, TVS Srichakra, Nocil, Suzlon Energy and PC Jeweller – whose shares have fallen anywhere between 22 per cent and 92 per cent –show retail holdings at 31-36 per cent.

Most of these companies are going through difficult phases. YES Bank is looking for a strategic investor for a considerable time now. DHFL defaulted on its financial repayment obligations and is facing asset sale by bankruptcy managers. Promoters of the company are being probed by the Serious Fraud Investigation Office and Enforcement Directorate (ED) for alleged money laundering and evergreening of loans.

Suzlon Energy is seeking a restructuring of its loans. PC Jeweller’s profits have been under pressure. Reliance Capital’s debt securities have been rated ‘junk’ now.

Jani said whenever there is pressure on fund managers to exit and stock price falls, retail investors tend to get carried away. “What is ironic to note is that even many research houses initially maintained a ‘hold’ call on a YES Bank or Indiabulls. Even they were caught unawares about the magnitude of the NPLs and other problems,” he said.

Tata Elxsi remained the only exception. The stock has over 30 per cent retail ownership (at 33.5 per cent), but is up 13 per cent for the year.

“We continue to believe the company would return to its fast growth track in FY2021,” Sharekhan said in a note.

Exceptions
Out of 35 BSE500 stocks where retail investors hold in excess of 20 per cent, 22 have offered negative returns for a one-year period. Exceptions included three stocks that rallied over 100 per cent during this period: Navin Fluorine International and Granules India and Can Fin Homes. These companies have retail ownership in excess of 20 per cent.

On Navin Fluorine, Emkay Global said: “The management’s strategy to improve its overall margin profile and return ratios by altering the revenue mix toward high-margin businesses remains on track. The commissioning of the CGMP-3 plant and improved visibility in the specialty chemicals segment bode well for future growth.”

For Granules India, Centrum Broking said the management has been delivering on its FY20 guidance as of now and has been seeing consistent revenue and earnings growth.

“The promoters have announced that the recent buyback would lead to meaningful reduction in pledge shares. We have increased our FY21earnings projections by 15 per cent,” it said.

Geojit has an ‘Accumulate’ rating on Can Fin Homes with a price target of Rs 232 at 2.4 times FY22 book value per share.

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