12 smallcaps that are impervious to market swings\, rising every month

The selloff in midcap and smallcap stocks that left investors with limited gainers failed to touch 12 stocks, which kept delivering consistent returns month after month so far this calendar.

The list included midcap chemicals player SRF, smallcap private sector lender DCB Bank and textile player Indo Rama Synthetics besides small and microcap stocks Leading Leasing Finance and Investment and Esaar (India), Sahyog Multibase, Jump Networks, Prabhat Technologies, Kavit Industries, Fredun Pharmaceuticals, RACL Geartech and Refex Industries.

All these stocks have given consistent returns to investors on a month-on-month basis since January this year (see Table) despite election uncertainty and escalating trade tension between the US and China and signs of slowdown in the domestic economy.

SRF, which was set up in 1970, recently said it would sell its engineering plastics business to DSM for Rs 320 crore as part of a strategy to focus on core operation.

The company has an annual turnover of Rs 5,600 crore. It has 12 manufacturing plants in India, two in Thailand and one in South Africa. The company’s market-cap currently stands at Rs 16,000 crore. The stock has risen 0.50-15 per cent each month this year.

Brokerage Sharekhan is positive on SRF with a potential upside of 10-12 per cent. “We expect SRF to report revenue and earnings 15.1 per cent and 28.5 per cent CAGR, respectively, during FY2019-FY2021E,” it said.

The company posted over 50 per cent YoY profit growth to Rs 191 crore in Q4FY19.

Private lender DCB Bank is hoping to double the size of its balance sheet in next three to four years. “We want to double our balance sheet in three to four years. If we grow loans to small and medium enterprises (SME), retail, agri, small ticket customer at 20-odd per cent per year, we should be doubling our balance sheet,” DCB Bank Managing Director & CEO Murali M Natrajan told PTI in an interview.

The lender’s balance sheet as of March 31 stood at Rs 35,791.83 crore, up 18.4 per cent from Rs 30,222.09 crore at March end 2018.

DCB Bank last month posted 50 per cent growth in profit at Rs 96 crore for March quarter on healthy core income and restricted bad assets. That number compares with a Rs 64 crore profit the bank had reported for the corresponding quarter last year.

Emkay Global Financial Services last month gave a ‘sell’ rating to DCB Bank with a 12-month target price of Rs 170. “We remain concerned about the bank’s loan portfolio, which is heavily skewed towards a relatively high-risk loan against property (LAP).”

HDFC Securities maintained a ‘buy’ rating with a price target of Rs 228. “With its core growth engine intact, we believe DCB Bank has the potential to grow at faster rates. We upgrade earnings by 12 and 16 per cent for FY20 and FY21E,” it said in a report.

Polyester manufacturer Indo Rama Synthetics reported a net loss of Rs 169.33 crore for Q4FY19 over a net loss of Rs 30.29 crore in the corresponding quarter last year. The loss for the quarter included an exceptional loss of Rs 115.19 crore. The stock has advanced 10 per cent in January, 0.73 per cent in February, 1.89 per cent in March, 0.14 per cent in April and 1.42 per cent so far in May.

Sahyog Multibase is engaged in the business plastic and chemicals raw material and polymers as well as petrochemicals. Shares of the company have advanced around 4 per cent in May so far. It gave over 25 per cent returns to investors every month from January to April.

The BSE Midcap and Smallcap index are down 8.50 per cent and 6.67 per cent so far this year, while Sensex is up 2.37 per cent.

“In the midcap and smallcap segments, the correction in valuation has been much sharper. Last year, Nifty midcap index was trading almost at a 30 per cent premium to Nifty largecap index. Now that premium has almost vanished, maybe even at a bit of a discount. A lot more value that has emerged in the midcap and smallcap segments. If things stabilise, we will find more value in that segment,” Mihir Vora, Director & CIO, Max Life Insurance, told ETNow in an interaction.12 stocks that are impervious to market swings, rising every month.