High retail bids could weigh on L&T Infotech

L&T Infotech might witness a subdued listing, fear market players, due to heavy participation from small investors

L&T Infotech might witness a subdued listing, fear market players, due to heavy participation from small investors. The company's initial public offering (IPO) of equity attracted over one million applications, one of the highest among recent IPOs, from retail (small) investors.

"Typically, retail investors look to exit on listing day. L&T Infotech has seen heavy retail interest due to the success of recent IPOs. This could weigh on the stock price on listing," said a broker, adding that the grey market premium of L&T Infotech had also crashed from Rs 120 to only Rs 12. L&T Infotech will list later this week.

Brokers advise bottom-up strategy

The broad rally in the markets has seen stocks across the board rise in a hurry. Valuations across segments are not cheap anymore and there are little signs of earnings picking up in a convincing manner. Early-bird results, which usually surprise positively, have also not been up to the mark.

In this backdrop, brokers are advising clients to deal with caution and recommending them to go stock-specific (bottom-up approach) rather than riding a particular theme. That's also because there are no secular trends in growth or earnings visible yet and within sectors, too, there are company-specific problems.

The advice is to pick stocks with strong earnings visibility even if they are relatively expensive. Such a strategy will help lend cushion when markets correct.

Index expulsion proves to be a blessing

Expulsion of a company from a benchmark index is considered a negative, as it triggers selling from passive funds and the interest in the stock sees a dip. However, the reverse is true in the case of Hindalco and Vedanta, which were removed from the Nifty50 index in December 2015.

Both stocks have seen a stellar rally ever since. Hindalco and Vedanta are up 86 per cent and 67 per cent, respe-ctively, while the Nifty has gained 11 per cent, tweeted a leading fund manager.