In the January to March period, HNIs increased their stakes in 812 companies, which on average depreciated 12.56 percent. In contrast, institutional investors like DIIs upped their stake in 529 stocks and FIIs raised their stake in 609 stocks in the period
A review of the past four quarters shows that a majority of the top 10 stocks where HNIs increased their holdings have underperformed the respective benchmarks. Image: Shutterstock
Rich investors are often considered to be competent strategists, big risk takers and savvy decision makers. It is assumed that these are people with a Midas touch, turning everything they touch into gold. A look at their investments in the recent past, however, shows it may well be incorrect. A Forbes India analysis of India’s affluent investors’ stake in companies shows HNIs may be risk takers but their bets have not quite beaten the benchmark. Analysts attribute this to “greed” and “overconfidence” in their stock calls.
Six out of 10 stocks held mostly by high net-worth individuals (HNIs) or super rich investors in the three-month period ending March have sunk, slipping as much as 67 percent, shows a Forbes India analysis of all stocks listed on the NSE, based on data sourced from Prime Database. To be fair, stock markets were in a major turbulence in the January to March quarter, with the Nifty falling 4 percent in the period.
However, this is not a one-off where HNIs’ top bets have missed the bus of making a fortune in the stock market. A review of the past four quarters shows that a majority of the top 10 stocks where HNIs increased their holdings have underperformed the respective benchmarks. According to markets regulator Securities and Exchange Board of India (Sebi), any individual investor with more than Rs 2 lakh investment in a single stock is defined as an HNI in India.
This phenomenon of losing money in top bet stocks gets pronounced as we sieve through more data. For instance, among Nifty 500 companies, seven of the top 10 bet stocks have fallen in the January to March period. Similarly, in Nifty Midcap, six out of the top 10 have fallen while seven out of 10 among Nifty Smallcap companies have slipped.
Experts attribute psychological and behavioural biases for such pitfall investment strategies by HNIs.