HNIs dared to buy stocks worst hit by Covid-19, paid through the nose

NEW DELHI: At a time when other investors were taking shelter in defensives like pharma, telecom FMCG and IT in a challenging environment, high net-worth individuals went on to buy riskier bets of casino owners, airline operators, housing finance companies and auto makers in March quarter.

End of March saw the beginning of the Covid 19-led lockdown, which wiped out demand for leisure and discretionary goods and services globally. While producers of essential goods fared relatively well, demand remained largely unaffected in that space.

This was visible in the price patterns that showed HNI bets largely failed to recover much in the recent rally, as the lockdown impacted these sectors real hard.

Some 16 BSE500 stocks saw over 200 basis points jump in HNI stake in March quarter. Fifteen of them are down more than the 25 per cent slide in the Sensex so far this calendar.

"For discretionary expenditure, we will have to wait. It is too early to take a call on how people are going behave in the post-Covid environment and what will be their behaviour, especially towards entertainment and related consumption. We think it will take longer to come back," Daljeet Singh Kohli of Valentis Advisors told ET NOW.

Data showed HNIs hiked stake in casino-owner Delta Corp by 200 basis points to 17.64 per cent in March quarter from 15.64 per cent at the end of December quarter.

The stock, which has Radhakishan Damani and Rakesh Jhunjhunwala as shareholders, has fallen 66 per cent year-to-date. While Damani cut his stake in this company to 1.17 per cent from 1.32 per cent sequentially, Jhunjhunwala and his wife Rekha held on to their 7.38 per cent stake during the quarter.

Aviation firm SpiceJet saw HNIs hike stake by 235 basis points to 13.67 per cent in March quarter from 11.32 per cent in December quarter. The airline, like others, has been grounded for nearly two months and, thus, failed to benefit from the recent drop in crude oil prices. The stock is down 64 per cent year to date.

Any suggestion of real estate investment at this point can raise many eyebrows. But HNIs were all okay with the idea in March quarter.

They hiked stake in NCC by 554 basis points to 21.59 per cent in March quarter from 16.05 per cent QoQ. They also increased stakes in real estate lenders Indiabulls Housing, GIC Housing Finance and DHFL by 238-554 basis points, sequentially. These stocks are now down up to 60 per cent year to date.

HNIs also raised stake in battered Tata Motors by 289 basis points to 12.86 per cent from 9.97 per cent QoQ. Moody's Investors Service has placed Tata Motors’ ratings under review for a possible downgrade. Fitch recently downgraded the long-term issuer default rating (IDR) of the company to ‘B’ from ‘BB-‘ with a negative outlook.

"Right now, we are hearing more of layoffs and job cuts. That is what dominating media headlines. Whenever you have an environment like this, you cannot be very positive on the consumption side," said Rajat Rajgarhia, CEO of MOSL.

Unmesh Kulkarni of Julius Baer India said people would possibly not be in a hurry to spend again. “Primarily because of either loss of income or job, the weak mood will prevail for some time," he said.

Ujjivan Finance, South India Bank, Reliance Power, GHCL and Care Ratings are some of the other battered stocks, which saw over 200 basis points rise in HNI holding in March quarter.