Stock markets the world over have seen a strong bull rally over the past 18 months but the Indian markets are facing volatility and have been in a correction phase since they reached their all-time highs on October 19.
The uncertainty surrounding the likely tapering of stimulus by the central banks, earlier than expected interest rate hikes, steep inflation and the impact of the Omicron variant of the coronavirus on economic recovery have put the brakes on the dream run the markets were enjoying.
Indian markets had fallen more than 8 percent from their record time highs by the end of November. The Nifty and Sensex declined more than 3.8 percent in November alone.
The Nifty Large Cap lost 3.9 percent while the Nifty Mid Cap declined 2.7 percent in the month, while the BSE Multi Cap and Smallcap indices fell 3 percent and 0.2 percent over the period.
“Large-caps have been beaten down given increased FII (foreign institutional investor) outflows over some time,” said Santosh Kumar Singh, head of research, Motilal Oswal Asset Management Company.
Echoing his sentiments, Deepak Jasani, head of retail research at HDFC Securities, said, “Currently the BSE Midcap and BSE Smallcap indices are outperforming the Sensex as the stocks in the former two categories are under-owned.” They would have less selling pressure from institutions in times like these and their future growth rates would be higher, Jasani added.
Experts believe the markets are wary about the macroeconomic factors and lack direction from the medium-term perspective while searching for triggers to gain momentum.
However, there were many portfolio management services (PMS) schemes from the broader markets that generated better returns than the indices during the last month.
PMS schemes cater to wealthy investors with portfolio sizes exceeding Rs 50 lakh. Their professional fee structure is different from that of regular mutual funds.
Of 269 schemes tracked by pmsbazaar.com in November, 218 generated better returns than the Nifty 50, the data shows. There were 46 schemes that generated positive returns even though the benchmark index witnessed a decline.
Six schemes generated more than 2 percent returns last month, led by Right Horizons – Super Value Fund (+4.58 percent), Silver Arch – Small and Mid Cap Equity Fund (+3.70 percent), Systematix – Dynamic Investment Portfolio (+3.35 percent), Sageone – Small & Microcap fund (+2.75 percent), Composite Investments Pvt Ltd – Emerging Star Fund (+2.65 percent), and Carnelian Asset Advisors – Shift Strategy (+2.18 percent).
However, not all of these top schemes disclosed their stock holdings for November. Moneycontrol has collated a list of the top five from among those that have disclosed their holdings.
This list of holdings may give investors an idea about which stocks the fund managers of these schemes betted on. But they should not in any case be considered ‘buy’ recommendations as every fund manager has his own investment strategy.
Right Horizons – Super Value Fund
Primarily focusing on midcaps, this scheme generated the highest returns of 4.58 percent among all PMS schemes in November. Its top five stocks were Apollo Pipes Ltd, Neogen Chemicals Ltd, KEI Industries Ltd, Polycab India Ltd and Dixon Technologies Ltd.
Composite Investments Private Limited – Emerging Star Fund
A small- and midcap-focused scheme, it generated returns of 2.65 percent last month. Its top holdings were Shaily Engineering Plastics Ltd, Mold-Tek Packaging Ltd, Prince Pipes & Fittings Ltd and ICICI Bank Ltd. It also had cash and equivalents in hand to support its strategy.
Carnelian Asset Advisors – Shift Strategy
Its focus on multicaps helped it generate 2.18 percent growth for its investors. Its top five picks were Mastek Ltd, Birla Soft Ltd, Larsen & Toubro Ltd, First Source Solutions Ltd and L&T Technology Services Ltd.
Green Portfolio – Dividend Yield
This thematic scheme generated a growth of 1.91 percent by investing in stocks such as Precision Camshafts Ltd, CESC Ltd, Phillip Carbon Black Ltd, Vedanta Ltd and Andhra Sugars Ltd.
Centrum PMS – Good to Great
It generated returns of 1.68 percent through its holdings which included Tanla Platforms Ltd, APL Apollo Tubes Ltd, Brigade Enterprises Ltd, GTPL Hathway Ltd and also some amount of cash and equivalents.
Experts remain confident about the markets and suggest investors should stay invested with a long-term perspective.
From a six-month perspective, largecaps should do better with Omicron concerns abating, added Singh of Motilal Oswal. “From a longer duration perspective, I remain bullish on all the segments, as I expect better GDP growth and a revival in the capex cycle”, he said.
Jasani advises investors to have exposure to all three classes in a proportion that suits their risk appetite. Historically, smllcap and midcap stocks have provided alpha returns to investors because of which retail investors typically prefer to invest in these stocks. “But they need to be aware of the fact that these stocks can fall faster in any downturn and test their patience in a bear market,” he cautioned.
Overall, in the medium term investors can focus on consumer staples such as Nestle and Hindustan Unilever. “The stocks have seen some downfall due to raw material inflationary pressures but the companies are expected to mitigate the same through price hikes,” said Vinit Bolinjkar, head of research, Ventura Securities Ltd.
He is optimistic about the non-banking financial companies segment and prefers HDFC Ltd and Indostar Capital that are witnessing a major transformation. “We have also been recommending investors to add couple of names from the alcohol sector,” he said. The companies in this sector are poised for a major re-rating given the tailwinds due to the aspirational and young population of India, government push towards ethanol blending, etc.