HNIs best stock pickers in FY09

Outsmart insurance cos, mutual funds, FIIs and retail investors

GUESS who is the smartest investor during the downturn? High net worth
individuals (HNIs) turned out to be the best stock-pickers during
FY09, with a clear edge over other investor communities such as
insurance companies, mutual funds, foreign institutional investors
(FIIs) and retail investors.
According to a SundayET analysis of the performance of BSE 100
companies and their share holding pattern, stocks where HNIs increased
their holdings performed better than stocks where other investor
communities raised their stake. HNI clients hold more than Rs 1 lakh
worth of shares in any particular company.
According to the analysis, group of stocks in BSE 100, which saw
higher accumulation of HNIs' wealth between April 1, 2008 and December
31, 2008, posted marginally positive return in the last quarter, while
stocks where there was an increase in the holdings of foreign
institutional investors (FIIs) and retail investors, declined by 6%
and 10%, respectively, during the same period.
Call it a coincidence or an unanimous strategy among the HNI
investors, they have identified the right stocks. For instance,
pharmaceutical companies, which were giving solace to investors in the
beginning of the bear phase, did not perform well in the last quarter.
Interestingly, HNIs lowered their holdings in the pharmaceutical
stocks by the end of the December quarter. HNIs also increased their
holdings in the auto companies in the same quarter following which
these companies have shown better performance.
Sanjay Sinha, CEO, DBS Cholamandalam Asset Management, said, "We
have seen that HNIs usually devote fair amount of time in
understanding the rationale for investing in any company. Also, they
enjoy higher access to information."
The second best set of investors is the insurance companies.
Insurance companies increased their stake in 60 companies of the BSE
100 Index during the first three quarters last year, and these 60
companies lost just half a per cent in the last quarter, whereas other
40 companies where they decreased their holdings lost almost 11%. By
decreasing their holdings in these companies, they minimised their
loss. Insurance cos' investment process stringent
ALSO, in the last financial year, these 60 companies lost around 36%,
whereas, remaining companies were down by more than 41%. D R Dogra,
deputy MD, CARE, said: "Due to regulatory requirements, investment
process of insurance companies are more stringent. They usually invest
in companies, which are fundamentally sound and carry higher ratings.
Also, they are long-term investors. Hence, their performance is
usually consistent without much fluctuation." Nevertheless, investment
decision of retail investors, as usual, caught them again on the wrong
foot. Retail investors increased their holdings in 49 scrips of the
index in the quarter ending December last year and these scrips
declined by 10%. On the contrary, other companies where they lowered
their stake performed relatively better by generating marginally
positive return. Also, in terms of yearly performance, these 49 scrips
lost around 53% but rest 51 companies lost merely 27% in the same
period. Nonetheless, performance of stocks in the financial year
2008-09, where MFs increased their holdings was better. Stocks on
which MFs increased their stocks, lost only around 32% in the last
financial year, whereas, stocks where FIIs increased their holdings
lost as much as 41%. Generally, Indian equity market follows the
investment trend of FIIs. Most of the time when FIIs are net buyers,
market moves up and vice versa. However, the fall in the prices of
stocks where FIIs increased their stake in December quarter last year
is higher than stocks, which witnessed decline in FIIs' holding in the
same period.
anand.rawani@timesgroup.com