Retail investors raise stakes in over 50% of companies in NSE500 in Q2; do you own any?

Party of retail investors continues in the D-Street as the number of registered investors on the BSE crosses 8.5 crore, and the trend is catching up in tier II and tier III cities as well.

Assam saw more than 200 per cent year-on-year rise in retail investors, followed by Manipur and Mizoram, saw over 100 per cent rise in the retail investor community, BSE data showed.

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Retail investors have been active in accumulating small and midcaps in the September quarter. They have raised stake in more than 50 per cent of companies in the NSE500 index.

Retail investors raised their stake in as many as 260 firms that include names like Hindustan Aeronautics, Mastek, Max Healthcare, IOC, Indiabulls Housing Finance, CRISIL, and Power Grid Corporation, etc. among others.  

Retail investors raised more than 10 per cent stake sequentially in 2 companies -- Hindustan Aeronautics and Mastek.  

HAL and Mastek are both fundamentally sound companies and there is a turnaround seen in both IT as well as defense-related sector.  

“Hindustan Aeronautics is a well-placed company in its sector and is one of the most dominant players in its sector. The company performed quite well YoY with its revenue as well as EPS growing over periods,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited, said.

“Mastek is a prominent IT player and in recent times it has been quite popular with Evosys acquisition, which will enable the company to provide end-to-end solutions and is also expected to help it increase its margins reasonably. The company seems to have strong earnings growth potential, a robust deal pipeline, improving deal sizes, and strong demand,” he said.

Retail holding in companies listed on the NSE reached an all-time high of Rs 18.16 lakh crore from Rs 16.18 lakh crore on June 30, 2021, an increase of 12.25 per cent, according to a PRIME Database report.

Social media, internet penetration, outbreak of COVID that encouraged work from home culture are some of the factors that led to the rise in investors' community with disposable time and income.

“Social media is playing a critical role in investing for new investors and it has both sides of the coin. On the one side, it is creating euphoria in many stocks, while on the other side, helping investors to get insightful information in their hands to make informed decisions, therefore, we are seeing a surge in retail ownership in many stocks,” Santosh Meena, Head of Research, Swastika Investmart Ltd, said.

“We are in a different kind of market, where there is a massive surge in retail participation in the Indian equity market, thanks to the technology which is helping in the penetration of the stock market in India,” he said.

The only worry is that most of the new investors debuted the equity market in the last one and a half years and they didn't see any meaningful correction so it will be important to see their reaction if the market witnesses any 10-20% correction, suggest experts.

“The short-term volatility will take out weak traders, however stock market penetration in India may continue to rise and the bull run is likely to continue for the next 2-3 years,” advises Meena.

Factors To Track:

Retail investors should keep a close eye on various qualitative and quantitative factors when pressing the buy or a sell button.

Retail investors before increasing stake in any stock must be cautious now as the markets are trading at higher levels as of now and appropriate caution must be exercised before increasing stakes in the company, suggest experts.

“Investors must look at the fundamentals of the company and see whether it is able to sustain its growth in revenue, profitability, operating cash flows and also look at the EPS as it suggests the wealth creation for the investors,” says Garg.

“Investors should increase the stake after a healthy correction and not on higher levels,” he added.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)