Catching falling knives? Retail investors hike up to 40% stake in 12 wealth-eroders

New Delhi: Retail investors have been catching the falling knives on Dalal Street. These players have been busy in accumulating beleaguered and troubled counters, considering every fall as a correction in them.

According to the data from Ace Equity, the shareholding of retail buyers has been constantly increasing in the top wealth eroders of Dalal Street, where other investors are smartly making an exit.

Data suggest that top 12 stocks on the BSE Allcap index, which have tumbled 50-85% in the last one year, have witnessed retail shareholding increase by 4-40% in the last one year and the share of individuals in on a linear rise.

Allcap index has about 900 stocks which comprise more than 95% market cap of BSE. However, some of these counters have been consistent wealth destroyers, whereas some have delivered multibagger returns in the past, which attracted the retailers.

Market participants suggest that retail investors fall prey to 'cheap stocks' and accumulate them at the lower levels, expecting multibagger returns, which does not turn into a reality in most of the cases.

Ajit Mishra, VP-Research, Religare Broking said that some investors buy shares based on the absolute prices instead of their valuations and then average them down at every dip, which puts them into trouble.

"Such a herd mentality traps them and they feel stuck at the lower levels," he cautioned. One should evaluate shares on the basis of their valuations and fundamental strength, he suggested.

The list is topped by KBC Global, which has tumbled as much as 86% in the last one year, whereas retail shareholding in the company has increased to 87.25% as of September 30, 2022, which was 38.58% as of September 2021 quarter.

It is followed by Future Consumer as the debt-ridden Kishore Biyani firm has tanked about 75% in the last one year. The shareholding of individual investors has jumped over 12% to 87.19% as of September 30, 2022, in the given period.

Sadbhav Engineering and Dhani Services are also down 70-75% in the last one year and the non-institutional shareholding has increased to more than 47% in each as of Q2FY23, which was below 40% as of Q2FY22.

Gayatri Projects, which has wiped out two-third of its value in the one year, has seen the retail shareholding to increase more than 75% as of September 30, 2022, which was less than 42% as of September 30, 2021.

Xelpmoc Design and Tech dropped as much as 65% in the last year and retailers' shareholding in the company jumped to 40% from 32% during the period under the review.


Dilip Buildcon and Zensar Technologies dropped 60% and 55%, respectively, in the last one year. Retail shareholding in these companies increased to more than 14% from 8% in Dilip Buildcon, whereas it more than doubled to 29% from 14% in Zensar Technologies.

HDFC Securities has a ‘buy’ rating on Dilip Buildcon with a target price of Rs 340 apiece as revenue missed its estimate while EBITDA/APAT beat its estimates. "We have recalibrated our EPS estimates higher to factor in margin recovery, robust OB growth, and debt reduction," it said.

Axis Securities has a ‘hold’ call on Zensar Technologies with a target price of Rs 230, whereas Indsec Research and IDBI Capital has the same rating on the counter with a target price of Rs 228 apiece and Rs 235 apiece, respectively.

Nureca, which delivered multibagger returns after its debut during the pandemic, is 55% down in the last one year. The stake of individual stake has increased to 27.8% as of September 30, 2022, which was less than 11% a year ago.

HEG and Quess Corp plunged more than 50% in the last one year. Non-institutional shareholding in HEG has increased to 30.6% in Q2FY23 from 23% in Q2FY22, whereas the same in Quess Corp jumped to about 17% from 12.3% during the same time.

ICICIDirect Research has buy rating on HEG with a target price of Rs 1,225, whereas SKP Securities has a buy rating on the stock with a target price of Rs 1,678.

IIFL Securities has suggested to buy Quess Corp with a target price of Rs 820 apiece, whereas Nuvama Wealth Research has the same rating but its target is Rs 720 for the stock.

Individual shareholding in GE Power India increased to 22% by end of September 2022 quarter from 17% September 2021 quarter. The stock has halved in the last one year.

Market experts suggest that investors should not blindly follow the trend and jump over these beleaguered counters with any signs of strong recovery in them. A strong recovery in balance is a must for them.

Kranthi Bathini, Equity Strategist, WealthMills Securities, said that one should not judge these companies with a single lens as some of these companies have fundamental issues, whereas others have failed to perform during a volatile market.

However, unless these stocks exhibit earnings recovery, one shall not expect stock performance, he added. "Earnings differentiate men from boys during the phase of consolidation as all run fast during the bull phase."

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)