NEW DELHI: Indiscriminate share buying by retail investors, especially newbies being referred to as Robinhood investors, is being blamed for the breakneck speed in which stock markets have risen from their March lows, shrugging off harsh economic realities.
On Dalal Street, June quarter shareholding data gives the first glimpse of the pockets that saw maximum buying by retail investors: low-value PSUs, small private and public banks, chemicals and small auto ancillary firms.
Of the 615 companies which have announced their June quarter shareholding data thus far, 68 saw over 100 basis points hike in stakes by individual shareholders.
These shareholding data are for investors betting up to Rs 2 lakh in a stock, thus they would incorporate holdings of the so-called Robinhood investors as well.
Fifty-five of these stocks have delivered double-digit returns since April 1, data compiled from corporate database Ace Equities showed.
Among these companies, the biggest retail bets of the quarter was South Indian Bank. Retail holding in this private bank jumped by 667 basis points to 51.88 per cent from 45.21 per cent at the end of March quarter.
The stock, which has climbed 30 per cent since April 1, now trades at 0.25 times its price-to-book value against 3.38 times for the industry leader HDFC Bank, 1.92 times for ICICI Bank and 1.42 times for Axis Bank.
Retail investors also bought into low price-to-book value banks stocks (0.2-0.8 times) such as Karnataka Bank (394 basis points), DCB Bank (380 basis points) and the state-run Jammu & Kashmir Bank (149 basis points).
Some buying was also seen in large PSU banks such as SBI (139 basis points) and Bank of Baroda (up 127 basis points), among others.
Except for Jammu & Kashmir Bank, which has gained 37 per cent since April 1, other bank stocks have failed to deliver good returns so far.
“I am not too gung-ho on the smaller banks. The way things are moving, big banks will become bigger. I am not sure how exactly the business models of smaller banks will adapt to the way things are panning out,” Hemang Jani of Motilal Oswal told ET last week.
Retail investors were also seen buying into state-run BHEL, GMDC, BEML, Cochin Shipyard and CPCL. Retail shareholding in these stocks rose by 100 to 415 basis points sequentially at the end of June quarter.
Many of these stocks have managed to reward investors. BHEL is up 80 per cent, BEML 38 per cent, GMDC 34 per cent, CPCL 29 per cent and Cochin Shipyard 22 per cent. Yet, except for BEML, others either trade at single-digit PEs or negative PE (loss-making businesses).
“PSU as a theme is coming back after two decades. If you really map the PSU index over Nifty, you will notice that the former has rebounded from a 20-year support. When such reversals happen, they do not end in a few weeks or a few months. I want to believe that this trend is going to continue over the next 6 to 12 months,” said Gautam Shah of Goldilocks Premium.
Auto ancillary stocks Apollo Tyres, Suprajit Engineering, PPAP Automotive, Atul Auto, Fiem Industries, Banco Products and Rico Auto Industries also saw retail buying after they hit their March lows. These stocks are up 15-65 from their March-end levels.
Atul Auto and Fiem Industries both trade at a PE multiple of 6.93. Banco Products trades at 8.46 times, Apollo Tyres at 12.6, PPAP Automotive at 11.90 and Suprajit Engineering at 17.6. They are low compared with the BSE Auto index PE multiple of 29.75 times.
Chemical stocks Kilpest India, Aarti Industries, GNFC, Bodal Chemicals, Jyoti Resins and Chembond Chemicals also saw retail investors’ holdings go up by 100-250 basis points. Except for Chembond Chemicals’ dismal show, other five stocks have risen 28-263 per cent since April 1.
Retail individuals’ stake in Aarey Drugs & Pharmaceuticals jumped to 23.16 per cent from 16.73 per cent sequentially. This stock is up 33 per cent since April 1. GIC Housing has seen retail holding rise 567 basis points to 31.38 per cent and the stock has surged 51 per cent since March end.
Retail investors also doubled their holdings in PVR to 8.92 per cent from 4.18 per cent at the end of March quarter. But the stock has failed to deliver a short-term return and is down 10 per cent since April 1.