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Retail investors outwit FIIs, MFs

S. Vaidya Nathan

TITAN Industries, MRF and NIIT are three stocks where the public shareholding has risen the most in 2002-03. The Titan Industries stock is up 90 per cent between March 2001 and now, MRF is up 19 per cent and NIIT has made modest gains of 14 per cent.

Contrast this with the three stocks where the holdings of foreign institutional investors (FIIs) increased the most in the same period - ACC, HDFC Bank and Zee Telefilms. While HDFC Bank is marginally down by 2 per cent, Zee Telefilms has been range-bound and ACC is up by 23 per cent. The track record is quite tilted in favour of retail investors at least in this period.

ACC seems to have emerged a big favourite among FIIs who have pushed up their stakes in the company by 14.8 per cent. The possibility of improvement in efficiencies, higher volumes and potential benefits from any increase in cement prices seems to have sustained the FII interest.

Apart from ACC, the other stocks where FII stakes have gone up substantially are traditional the FII favourites such as Infosys, HDFC Bank, HDFC, Gujarat Ambuja, Satyam Computer and ICICI Bank. Tata Steel and Tata Engineering too figure in the list with renewed FII interest. Significantly, none of these stocks barring Tata Engineering and Gujarat Ambuja, to a small extent, has provided enhanced value in the last 15 months.

Sample the basket where public shareholders have been putting their eggs in: apart from the top three, namely Titan, MRF and NIIT, the others include SBI, Bank of India, Syngenta and Tata Elxsi, which have posted sizeable gains. Disinvestment-linked buying in VSNL is also clearly in evidence and investors may have got out through the open offer. The likes of Sonata Software and Reliance Capital too figure in the preferred stocks though investors are unlikely to have made money here.

The toppers in the selling list of retail investors are interesting. Investors seem to be using open offers to exit MNC stocks such as Cadbury, Wartsila NSD and Philips and used price increases in stocks such as ACC, UTI Bank, UB, Satyam Computers and LIC Housing Finance to book profits.

Interestingly, two stocks fancied by FIIs — ACC and Tata Engineering — have been dumped by retail shareholders.

The latter may be seeking to capitalise on price increases. But in these two stocks, the FIIs may well be set to reap gains in the next year or so given the improvement in fundamentals. Public shareholders may find themselves in a similar position in Titan and MRF, which they have fancied, and FIIs have been big sellers.

Corporation Bank has been a major casualty of FII selling - their stakes in the bank are down by 3.2 per cent.

Perhaps, a case of profit booking combined with some concern about enhancement in the level of non-performing assets.

Larsen & Toubro - every now and then highly fancied by FIIs and mutual funds - has come under intense selling pressure following the acquisition of stake by Grasim. This has effectively put the lid on restructuring of L&T's cement business, which was a driving factor for institutional interest in the stock.

SSI has been the biggest sufferer in the hands of mutual funds and FIIs who ramped it up in the first place and have now moved out of the stock in a big way, dragging the price lower.

Overall, there appears to be little to choose between FIIs and mutual funds. Retail shareholders as a class may have done a touch better in the last one year. But this does not necessarily mean all retail investors should strike out on their own. There are quite a few reasons:

One, unless you have a lot of money (say Rs 5 lakh or more), you may end up owning a small number of stocks. Two, the risk is much higher if you own one or two stocks, and a lot would depend on timing. Three, the dice, overall, is loaded against small investors due to information flow differences that lead to insider trading and informed trading.

Institutions may be able to capitalise on better information flow.

So, unless you are the type who loves risks and can afford to take losses, direct equity exposures can be avoided. Mutual fund schemes with a good track record over long periods — and doing well in recent quarters too — may be the better way to go.

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