Fund managers’ who have remained net sellers in the Indian equity markets to the tune of over Rs 60,000 crore, raised stake in more than 100 companies consistently in the last four quarters, data from AceEquity showed.
Almost 80 percent of the stocks in which fund managers raised stake are from the small & midcap space which suggests that thematic funds had their focus on companies that promise growth.
Stocks in which fund managers raised stake include Indian Energy Exchange, Natco Pharma, Infosys, Bajaj Electricals, Blue Dart, Apollo Pipes, among others.
Small & midcaps stocks outperformed benchmark indices in the year 2020 thanks to global liquidity which was chasing growth, under ownership along with the fact that most of the stocks were trading at attractive valuations after two years of underperformance compared to largecaps.
“The thematic funds focused on broader markets are expected to do well in the future. The money appreciation typically starts in the large caps at the start of the rally. Once the broad largecap has rallied, the money flow starts picking up in the midcaps and subsequently in the smallcaps,” Nitin Shakdher, Professional Investor and Founder & CEO, Green Capital Single Family Office told Moneycontrol.
“We can expect a structural broader market rally especially with select companies in the undervalued midcap/smallcap space,” he said.
Seven stocks in which MFs raised stake in the past four quarters doubled investors wealth in 2020. These include Granules India, Birlasoft, Vaibhav Global, IndiaMart InterMesh, Kirloskar Ferrous, Butterfly Gandhimathi Appliances, and Tata Elxsi.
“The seven stocks which doubled investor wealth are from healthcare, IT (2), retail (2), automobile & ancillaries and consumer durables sectors. While these sectors will continue to be in focus in 2021 also, a stock-specific research based on the upcoming quarterly results would provide better guidance for investors,” Gopal Kavalireddi, Head of Research, FYERS told Moneycontrol.
Kavalireddi further added that if financials and fundamentals continue to improve and the stock witnesses a correction of about 20%, then investors can look at investing fresh capital once again.
Small and midcap indices had a torrid time over the last three years. Post their all-time highs in January 2018, these segments went into a bear phase, witnessing profit-booking at regular intervals.
Plagued by liquidity crunch due to ILFS crisis, economic downturn and shunned by retail investors, they delivered negative returns. Investors are advised to remain stock specific and include those stocks that promise growth said the experts.
“As the stocks have doubled the wealth of the investor, they may book some profits in the selected scripts. The market may not continue the same rally as it did in November,” Gaurav Garg, Head Research, CapitalVia Global Research Limited told Moneycontrol.
Garg further added that if the company does not have a large market share or is unable to post consistent growth, investors can book profits as the prices have doubled, but if the company is large and has good results for a few years, they can keep it for long term.
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