Those who took the plunge when others were fearful

Between June 2013 and June 2014, the promoter holding of both firms has remained constant, at 45.63% for FTIL and 26% for MCX

On July 31 last year, Business Standard published a news article titled 'What is dragging Financial Technologies group stocks?' The piece talked about the rumours surrounding National Spot Exchange (NSEL), the change of guard in the finance ministry, the levy of a commodities transaction tax and a lukewarm start to the much-hyped equity platform. (https://www.business-standard.com/article/ markets/what-is-dragging-financial-technologies-group-stocks-113073000373_1.html). At that point, Financial Technologies (FTIL) was trading at Rs 550 and Multi Commodity Exchange of India(MCX) was at Rs 692. They had both lost around 60 per cent of their values from the peaks hit in Diwali of 2012.

That evening, the government delivered the death blow it had been holding back for a while, as documents that became public later would reveal, on NSEL. As the latter put out a circular indicating settlement of contracts would take 15 days, it was clear for the brokers and market players who were in the thick of things that life for the group would never be the same again.

Unprecedented selling emerged on the morning of August 1, as both stocks plunged to life lows. MCX hit its all-time low on August 19, at Rs 238. FTIL continued to fall, hitting its nadir at Rs 102 on August 30.

As we approach the first anniversary of the NSEL collapse, both the stocks look like missed opportunities. At Rs 835, MCX could have made you richer by 2.5 times, meaning Rs 1 lakh invested in the stock on August 19, 2013, would be today worth Rs 3.5 lakh. The same story with FTIL, which has rallied to Rs 355, again a gain of 2.5 times.

Who are these smart investors who grabbed the investment holy grail, of venturing when others were fearful? An analysis of the shareholding pattern of the two stocks tells an interesting story. Between June 2013 and June 2014, the promoter holding of both companies has remained constant, at 45.63 per cent for FTIl and 26 per cent for MCX. Institutional holdings of both stocks fell dramatically in the September 2013 quarter and has never recovered.

Some 45,340 retail investors held 8.38 per cent FTIl stock at the end of June 2013. By September 2013, the number of retail investors holding the stock spurted to 72,564. Their combined holding more than doubled to 17.64 per cent. The reverse happened with institutions, whose number and holding halved. By the latest data, nine individual investors hold 12.16 per cent of the firm. One of them, Laxmi Shivanand Mankekar, holds 2.93 per cent.

Around 59,000 individuals hold another 14 per cent. Directors and their friends and relatives, who held about eight per cent before the scam broke, do not figure in the list today.

Even in MCX, the institutional investors, both domestic and foreign, have fallen but more gradually. While, the non-institutional holding has swelled to 37 per cent. The number of institutions holding the stock fell to 63 from 131, and their holding fell to 36.89 per cent from 58.38 per cent a year before. While 18 institutions held more than one per cent then, only 13 hold more than one per cent now.

One difference in the small investor holding of MCX is that the number of investors did not spurt in the quarter after the scam broke. It increased only five per cent, to 163000 from 156000. This could be interpreted as many of the small investors who had bought at higher levels were averaging out their holdings by buying more when the stock plunged.

With FTIL signing a share purchase agreement with a new investor, the MCX stock seems to have put its bad days behind. It is already trading well above the pre-scam levels. But, will it give the 2.5 times upside from here? The future of FTIL still looks far less brighter, with settlement of NSEL dues still looming large, even as its other exchanges are slipping out of its hands, one by one. Like that article a year before, this one also has to end with the question: Would this, too, pass?