There are as many as 72 companies out of 168, which fell 10-90% in the last year. Despite the selloff, fund managers were active in raising their stake consistently in the last four quarters, data showed.
Fund managers have been actively hunting for beaten down and attractively valued small and midcap stocks. They have raised stake in as many as 168 companies consistently in the last 4 quarters, data from Ace Equity showed.
Even though Sensex might be trading near record high but the small & Midcap index is still down by about 20 percent from their respective record highs which makes some of the stocks attractively valued.
Although investors should not blindly follow fund managers' decision to buy or sell stocks, a brief look at the portfolio could help investors shortlist stocks which could turn out to be wealth creators in the near future.
Stocks in which fund managers consistently raised stake in the last four quarters include names like Garden Reach, Brigade Enterprises, BEML, Asian Paints, Kotak Mahindra Bank, RIL, HUL, Pfizer, ICICI Bank, Volta's, Axis Bank, AU Small Finance Bank, DCB Bank, ACC, L&T, Torrent Power etc. among others.
“While Sensex is at 40K, one must remember that the broader markets are still significantly lower from their highs like the BSE mid-cap index is down 19 percent and the BSE small cap index still lower by 33 percent from their respective highs,”.
“There is a conviction in some of these names and based on the themes, the fund managers have been taking position in some of these. A lot of the PSU candidates like Garden Reach, BEML, BEL could fit into the next set of stocks selected for privatization by the government given their strong balance sheets.
Clearly, the conviction is strong among the blue chip stocks as the likes of Asian Paints, Bajaj Finance, HDFC Bank, ICICI Bank, HUL which have delivered consistently in many parameters, added Bothra.
The mid cap & small cap indices, however, are unlikely to breach the previous highs anytime soon and neither all of the stocks in these spaces are about to get re-rated. The September quarter earnings season failed to make any noise about a recovery in the offing.
A close look at the data also suggests that fund managers used correction in the stock to increase their stake in some of the small & mid caps.
There are as many as 72 companies out of 168, which fell 10-90 percent in the last year. Despite the selloff, fund managers were active in raising their stake consistently in the last four quarters, data showed.
Stocks in which fund managers raised stake despite a selloff include names like TVS Motor, Delta Corp, Sun TV, Coffee Day, Tejas, Apex Frozen, BASF, IG Petro, Chennai Petro, Thomas Cook, ZEE Entertainment, HOEC, Bajaj Electricals, Natco Pharma, etc. among others.
There are stocks which have fallen out of favour in the last one year due to problems faced by all players in the industry but could be a good long term play.
“Stocks where mutual funds are continuously buying amid a major fall, Coffee day is a stock where after a recent turmoil, some fund managers look value in its business and it could be a good bet for better returns but the quality issue is still there.
“Among other stocks, Apex frozen, Eris life sciences, Ashok Leyland, Balkrishna Industries, Nilkamal, Page Industries, and Subros are good stocks to buy at current levels,” he said.
What should investors do?
Tracking the mutual funds buying and selling activity is helpful for investors but it should not be a single factor while investing in any stock, suggest experts.
Investors get to know about mutual buying or selling at the end of the quarter so there will be always a timing risk.
“While FPI or MF holding provides cues to look into the stocks however investors should not follow the buying and selling patterns of institutional investors blindly. One should understand the reason behind their decisions and go through a company’s financials and commentaries to figure out their future plans,” said Bothra of Ashika Stock Broking.
“Likewise, some of these bets could be a very long term in nature. One must look out from broad stories like the formalization of the economy, or ease in trade restrictions and find the beneficiary industries and the potential players among-st those,” he said.
Bothra further added that it is always advisable for an individual non-market savvy person to consult professionals in allocating their hard-earned money into equity rather than getting lured to the illusion of profit-making in a short period of time themselves. Simply by replicating any marquee investor or fund manager is fraught with risk.
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