Retail investors hit exit button in 79 ‘beloved’ stocks; did they ditch you?

NEW DELHI: Every time an unforeseen event jolts the stock market, the weaker hands exit first.

In the recent turmoil in the domestic stock market due to the unexpected outcome of the US presidential election and Prime Minister Narendra Modi’s surprise demonetisation drive, shares of many retail-heavy stocks have seen sharp cuts.

Among the NSE-listed stocks, at least 79 stocks known to be popular with retail investors have slipped as much as 20 per cent ever since the announcement of demonetisation on November 8. As many as 15 other stocks plunged between 30 and 42 per cent.

Kakatiya Cement, where individuals with less than Rs 2 lakh worth of shares held almost 40 per cent as of September 30, has slumped 42 per cent to Rs 204.65 apiece on Tuesday from Rs 353 on November 8.




Prakash Constrowell, where retail individual investors held 31.28 per cent stake on September 30, witnessed a 41 per cent drop since the demonetisation move.

Duncon Infratechnologies, a trade-to-trade (T2T) group stock, has tanked 36.79 per cent during this period.

Realty firm Prajay Engineers and construction and engineering company C&C Constructions have slid 35 per cent and 34 per cent, respectively, in post-demonetisation equity selloff.

Rohit Gadia, CEO at CapitalVia Global Research, said: “A continuous increase in retail participation in a particular sector or group of stocks compared with the usual holding ratio between retail and institutional investors should usually raise the red flag. As retail investors’ risk-taking ability is lower compared with institutional investors, it becomes difficult for them to withstand short-term volatility. During such times, a stock may see extreme swings because of panic selling by retail investors. As a thumb rule, we recommend investors to avoid any stock where retail participation is higher than 15-20 per cent. The lesser it is, the better.”

Among others, shares of Sundar Industries, Dynacons Systems & Solutions, Soma Textiles, VLS Finance, Asian Granito India, Ajmera Realty, Bharatiya Global Infomedia, Binani Industries have dropped over 30 per cent during this period.

Out of the 15 stocks, the trailing 12-month PE levels of nine stocks are either in single digits or could not be calculated due to losses. Five stocks, including Som Distilleries and Bharatiya Global, have seen a drop in PE ratios.

“In case a company has a large retail holding, any news in the market can cause panic selling or buying, unlike companies where institutional investors hold large stakes, as buying and selling by these investors is usually based on well-informed and calculated decisions. Although long-term prospects of some of retail-heavy stocks could be good, from a timing prospective, we do not believe it is right time to enter the stocks with high retail holdings,” Gadia said.