Making money in equity markets is hard even when benchmark indices rise by more than 25 percent in the year.
Key Indian benchmark indices have risen by nearly 26 percent so far this year. But when it came to individual stocks, not all stocks owned by by market mavens such as Rakesh Jhunjhunwala, Porinju Veliyath, and Dolly Khanna turned to gold.
We picked up stocks of only those companies in which these stalwarts owned more than 1 percent stake. Only a fraction of stocks managed to more than double these ace investors' wealth so far this year.
The stocks that more than doubled in value were largely from the small and midcap space.
From the portfolio of Rakesh Jhunjhunwala – seven stocks more than doubled investor wealth. These included Geojit Financial Services, Prakash Industries, Edelweiss Financial Services, Escorts, VIP Industries, and Delta Corp.
Chennai-based couple Dolly Khanna and Rajiv Khanna, who have a knack for spotting multibagger stocks, trimmed their stake in almost 80 percent of the companies in the portfolio during the quarter ended September.
As many as 4 stocks from their portfolio more than doubled investor wealth this year. They were Emkay Global Financial Services, Rain Industries, NOCIL, and Tata Metaliks.
Kochi-based investor Porinju Veliyath, who is known for spotting multibagger opportunities as well, recently picked up stake in two companies – BCL Industries this month, and Kerala Ayurveda last month.
Among companies in which Porinju or his firm Equity Intelligence hold 1 percet stake or more, Vista Pharmaceuticals and RACL Geartech were the ones that gave a return of more than 100 percent.
Small & Midcap stocks shine:
If we take a closer look at the composition of stocks that have more than doubled investor wealth this year, almost all of them belong to the small and midcap space.
The broader market has outperformed Sensex and Nifty by a wide margin so far this year. The S&P BSE Midcap index rose nearly 52 percent, and the S&P BSE Smallcap index rallied nearly 50 percent, compared to 26 percent rise seen in the S&P BSE Sensex.
The domestic liquidity-driven rally, which have fuelled Indian markets this past year, has also raised valuations of many small and midcap stocks without any meaningful recovery in fundamentals.
Most analysts are advising investors to either cash out or book partial profits especially in stocks that are trading at premium valuations. But, all in all, it still makes sense to hold small and midcap stocks in your portfolio for higher returns.
“The mid and small cap indices are outperforming the Nifty and scaled new highs. The rally is likely to continue further as interest in these companies is getting more attention from the investors to generate better returns than traditional Banks FD or Bonds which have very low yield,” Yogesh Mehta, VP-Retail Research, MOSL told Moneycontrol.
There are plenty of opportunities available for investors in the small and midcap space and as long as domestic investors keep pumping money, the market is likely to continue trading at premium valuations.
Investors have pumped in over Rs 51,000 crore into various mutual fund schemes in October, after pulling out more than Rs 16,000 crore in the preceding month, latest data from industry body Amfi showed.
Besides, strong domestic liquidity reforms initiated by the Modi government provide ample growth opportunities to most small and midcap firms, which is a big positive.
“The reforms which were undertaken in recent past be it demonetization or GST would be instrumental in shaping up the quality of growth in future. Coupled with other reforms viz., implementation of Aadhaar, IBC and Jan-Dhan Yojana, the economic progress would be all-inclusive and positively impacting each and every individual in the country thereby leading to improvement in the demand-driven consumption,” Arun Thukral, MD & CEO, Axis Securities told Moneycontrol.
“The markets are expecting robust earnings growth from H2FY18, thereby keeping the markets upbeat. Mid and smallcap stocks have rewarded the investors handsomely in recent past. An investor should undertake a detailed study before investing in small and midcap stocks,” he said.
Thukral added that once convinced, an investor should set a target based on the fundamentals of a company and accordingly book profit once the target price is reached.