Smallcap PMS strategies delighted the rich with solid returns for August

As the wind shifted in favour of broader market, smallcap and midcap strategies managed by the money managers for the rich delivered robust alpha in August, a month that saw BSE Smallcap index gain around 10 per cent and BSE Midcap index 7 per cent.

With 25.13 per cent gain, Negen Capital’s Smallcap Emerging Strategy emerged as top gainer. Jindal Steel and Power was the top holding of the fund, followed by Future Enterprises, Greenpanel Industries, Max Healthcare and KPIT Technologies.

Centrum PMS’ Micro, Marcellus’ Little Champs, Ambit’s Emerging Giants, Equirus Securities’ Long Horizon Fund and Nine Rivers Capital’s Aurum Smallcap Opportunities also delivered 15 to 19 per cent returns for the month.

Granules India, Vaibhav Global, Mold-Teck Packaging, Affle India and V-Mart were among the major holdings of Centrum PMS’ Micro Strategy, while Marcellus’ Little Champs and Ambit’s Emerging Giants held some of the common stocks such as Alkyl Amines, Garware Technical Fibres, DCB Bank, GMM Pfaudler, MAS Financial, LA Opala, Ultramarine & Pigments and Amrutanjan Healthcare. Shares of these companies advanced up to 38 per cent last month.

Little Champs also held Galaxy Surfactants, Mold-Teck Packaging, Suprajit Engineering, PPAP Automotive, Sterling Tools, Music Broadcast, V-Mart Retail and Lumax Industries, while Ambit’s Emerging Giants had a couple of other names such as Hawkins Cooker, Can Fin Homes, Sundaram Fasteners and Cera Sanitaryware.

Shankar Sharma, a seasoned investor and Vice Chairman and Joint Managing Director of First Global, is bullish on Indian smallcaps after their steep fall between January 2018 and March 2020.

“Our view has been positive on smallcaps since April. There is still room left in the segment. However, investors should be careful while picking stocks from this segment. We are playing in focused themes like pharma, chemicals and have maintained a bottom-up approach on companies in last three-four months,” he said.

Buoyant Capital’s Opportunities, Capgrow Capital Advisors Special Situations, Centrum PMS Multibagger (Deep Value), ICICI Prudential PIPE, Karma Capital Advisors Long Only India Public Equity, Centrum PMS Deep Value IV and Kotak’s Smallcap and Midcap were among other smallcap, multicap and midcap schemes that gained over 12 per cent each last month.

Saurabh Mukherjea, Founder, Marcellus Investment Managers told ETNOW last week that smallcaps and midcaps do make sense at the moment, but one should look for cleaner promoters and companies with dominant franchises.

“If you invest in these, you will make steady returns over the next two to three years. However, if you get caught up in the frenzy, once again the story of the past will repeat, which is one year of good returns followed by two to three years of nothing,” he said.

Overall, 132 PMS strategies out of 177 schemes outperformed Nifty in August, data collated by PMSBazaar showed. Benchmark Sensex and Nifty gained nearly 2.80 per cent during the month.

Brokerage Motilal Oswal Financial Services believes at 21 times one-year forward earnings, Nifty valuations do not look as lucrative as they were a few months back.

Among the largecap-focused PMSes, Ace Pro Advisors Largecap Strategy, Emkay’s Emaky’s 12, Pelican’s Pelican PE Fund, Concept Investwell’s Leged and Green Portfolio’s Index Fund, Right Horizon’s India Business Leader, Asit C Mehta’s Ace 50 and Sanctum Wealth’s Indian Olympics gained between 2.50 per cent and 6.30 per cent for August.

A gush of liquidity supported market sentiment during the month. Overseas portfolio investors pumped in a massive Rs 49,879 crore in a net basis, as excess liquidity and low interest rates in global economies drove money into emerging markets.

Data from the depositories showed the equities segment saw a net FPI investment of Rs 47,080 crore, while Rs 2,799 crore went into debt and hybrid segment.

Among the underperforming PMSes of August were Credent Asset Management’s Growth Portfolio, Silverarch’s India Select Bluechip, Accuracap’s Alpha 10 and ICICI Prudential’s Largecap Portfolio, which retreated between 0.28 per cent and 5.79 per cent.