Small Retail Investors: Scapegoats Again
Allies Fin Serve { Website : http://www.Alliesfin.Blogspot.Com }
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http://www.moneycontrol.com/india/news/market-outlook/small-retail-investors-scapegoats-again/379135
Small Retail Investors: Scapegoats Again | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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"Wall Street is always the same: only the pockets change." - Jesse Livermore
Another quarter is over. And in the midst of earnings season, a clear trend is emerging. No we are not talking about the dismal reviews. This column will cover it at the end of the earnings season. The trend is the changing ownership structure. From the first set of numbers, it is evident that smart monies continue to desert India Inc. The figures below are adjusted for buy-backs, FCCB and warrant conversions. It's disappointing. Small retail investors continue to buy the decline quarter on quarter. (Read here: Small Retail Investors: The Scapegoats)
The Sensex and Nity ownership pattern includes changes in Reliance ownership on account of warrant conversion by promoters. So, Reliance promoter stake moved up by 4% odd. The number of equity shares of Reliance adds up to nearly 7% of the total shares of Sensex companies. This implies that other promoters in Sensex companies have actually sold stake.
Source: CNBC TV18 Analysis, CMIE
Source: CNBC TV18 Analysis, CMIE
Consider this small example. Post the Satyam fiasco, FIIs continue to exit the counter big time. Even MFs and other investors have exited significantly. However, small retail investors continue to buy the counter. Several investors' groups, where I am a member of or have been forwarded by friends, seem to have chains on value buying on Satyam. It's preposterous to even think of value in Satyam. Several realms of print and numerous hours of TV footage have been spent explaining the developments on the Satyam saga. But, small retail investors get lured by traders and/or broker advice. Don't fall prey to unsound advice. It's your hard earned money. Don't let it run lose. Remember, the IT dotcom bust. Several IT stocks crashed 95% plus. And yet found no value in the 2003-2008 Bull Run.
So, are small investors averaging? The number of shares per small retail shareholders provides some clues here. This seems to be on the rise substantially. Therefore the answer to the question whether small retail investors are averaging seems to be partially in the positive. Why partially? The reason is several new small retail investors might have also ventured to buy the stock which they could not afford a few quarters back. But small retail investors forget the basic rule of averaging. You average on the up tick, not when the stock is on its way down.
The other concern is that small retail investors hold larger share of the small and mid cap counters. This again is a flaw in investing. Whenever the new Bull Run will finally start in the Indian equity market, the first round of fresh buying will be in the large caps. It is common sense. Do not lap up these small and mid cap companies. Stick to large cap blue chip companies, if you wish. In times, when flight to safety is the call for the day, it's frivolous to plough your hard earned money into risky assets. You never know when the next company will announce that its book was 'cooked up' through creative accounting.
Times are tough. Small retail investors must protect their hard earned cash. No one is clear which way the market will go and for how long. So do not stick your neck out and invest all your hard earned money at one go. If you can't stop yourself from investing, at least make the investments in bits and pieces. You will get lots of opportunities.
To sum up in Jesse Livermore words, "When the market goes against you, you hope that every day will be the last day - and you lose more than you should had you not listened to hope. And when the market goes your way, you become fearful that the next day will take away your profit and you get out – too soon." For small retail investors patience is the key to the game now. Disclosure: The author is not permitted to trade and/or invest into the equity market directly or indirectly, apart from investing (long only) in mutual fund products. His equity exposure is only to the extent of ESOPs granted by the employer. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
By --
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Allies Financial Services
Website : http://alliesfin.blogspot.com
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