18 stocks from top 5 PMSes outperformed Nifty in FY20; worth a look?

FY20 was a year that every fund manager and investor would like to forget, as the Nifty tanked more than 22 percent. Most fund managers closed the financial year with double-digit losses.

Of the 141 schemes tracked by PMSBazaar.com, an online portal for comparing portfolio management services (PMSes), 59 outperformed the Nifty50 in FY 20.Only two PMSes gave positive returns in the same period.

Marcellus’ Consistent Compounders, a multicap scheme, was one of them. Consistent compounders identifies firms with high pricing power that helps sustain a large gap between returns on the cost of equity and capital employed.

The other scheme that bucked the trend was Ambit Capital’s Coffee Can portfolio, a largecap portfolio. Ambit’s Coffee Can invests in equities by focusing on the ability of a business to deliver healthy growth consistently and RoCE over a long time.

“At Ambit AMC we always believe in buying quality businesses. It is these steep corrections that provide long-term investors with an opportunity to build a quality portfolio,” Manish Jain, Fund Manager, Coffee Can PMS at Ambit AMC, told Moneycontrol.

“The approach remains largely unchanged except that many businesses which were otherwise proving to be expensive are now much more affordable,” he said.

PMSes cater to wealthy investors with portfolio sizes exceeding Rs 50 lakh. The professional fee structure is also different from a regular mutual fund (MFs).

We have collated a list of top stocks fund managers trusted for their portfolios that outperformed Nifty50 in the last 12 months. However, their benchmarks could be different.

There are top 18 stocks based on the weightage they have across five PMS schemes filtered based on returns given in the last 12 months.

Stocks that most portfolio managers trusted the most include HDFC Bank, Page Industries, Asian Paints, Pidilite Industries, Berger Paints, HUL and  ICICI Bank, according to data compiled from PMSBazaar.com.

The Indian market witnessed a massive selloff in March, wiping out gains made by most of the fund managers in the previous financial year. Most global markets that were hitting fresh highs in January 2020 touched their 52-week low in March.

Rise in coronavirus infections in March across the world dampened sentiment, which triggered a risk-off mode in the equities, thanks to consistent selling by foreign investors across the globe and India was no exception.

“We should remember whenever there is uncertainty at a global level these global emerging market funds get redemption and the portfolio manager has no option but to sell or reduce allocation to stocks he owns across including India,” Aditya Khemani, Fund Manager, Motilal Oswal Asset Management Company, said.

“Similarly, when the uncertainty reduces, you will see the money come back equally fast. This pandemic is something people have not been taught in textbooks, hence financial markets don’t know how to price this risk in most asset classes.”

What are fund managers doing?

It is a difficult time to invest but also an opportune time to generate wealth, say experts. The extension of the lockdown will cost the economy as well as India Inc in terms of lower earnings.

Most economists across top foreign brokerages have downgraded the forecast for India GDP. "We revise down our GDP growth forecast further to 0.0% for CY2020 (from 2.5%), and to 0.8% for FY20-21 (from 3.5% earlier). We also expect a weaker profile for recovery given the deteriorating global backdrop, and rising risk of COVID outbreaks leading to local-level shutdowns," Rahul Bajoria, Chief India Economist, Barclays, said.

"Further, combined with the disruption in several service sectors, we now estimate that the economic loss will be close to $234.4 billion (8.1% of GDP), assuming that India will remain under a partial lockdown at least until the end of May."

For markets, the story will be slightly different. Yes, D-Street will keep an eye on COVID-19 cases but at the same time, it will also be waiting for a stimulus packages, which could be rolled out in April in India and across the globe.

Some fund managers are keeping some firepower in terms of cash to deploy at a later date. But, most of them are making use of the dip to get into stocks that were earlier looking expensive.

“Some of the great quality companies of India that we had not bought in the past due to high valuation and if today we are finding that their greatness will sustain in the post-corona world, we are deploying our money there,” Shailendra Kumar, CIO, Narnolia Financial Advisors told Moneycontrol.

“There are two ways to position your portfolio in a volatile market-- one, is by keeping some portion in cash and the other, is owning stocks so that your beta on the downside is less than 1 and as an investment philosophy, we follow this second route. Effectively say if your portfolio beta is 0.8, it implies that the portfolio is in 20% cash. Though we have some small portion in cash that is more operational in nature,” he said.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.