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Special situations helped this PMS hit the jackpot in Jan; here’s how

PMSes cater to wealthy investors with portfolio sizes exceeding Rs 50 lakh.

, ET Bureau|
Last Updated: Feb 13, 2020, 05.34 PM IST
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Returns delivered by special situations does not look like sheer luck. Historical data shows the scheme has garnered annualised returns of 9.59 per cent since its inception on October 31, 2018.
Dalal Street’s top money managers for the rich managed to generate robust alpha for clients in January thanks to superlative performance from some of the second-rung stocks. The BSE Midcap and Smallcap indices advanced 3.30 per cent and 7.07 per cent last month, while the benchmark Sensex dipped 1.29 per cent.

At least eight PMS strategies delivered double-digit returns last month, with Capgrow Capital Advisors Special Situations scheme rallying the most at 20.02 per cent, while Motilal Oswal’s small and midcap strategy IOP rose 13.13 per cent and Centrum PMS MICRO 12.70 per cent, data from PMSbazaar showed.

“We try to play events like mergers, demergers, broken IPOs, buybacks and delisting under the Special Situations strategy. We also play with distressed securities where there is deep value. Brookfield taking over Indostar Capital Finance, the buyback story in Fortis Healthcare and demerger of IIFL Finance rewarded us handsomely last month,” said Arun Malhotra, Portfolio Manager & Partner, Capgrow Capital Advisors.

Shares of Indostar Capital Finance soared 56 per cent last month. Malhotra said Indostar was quoting at 0.5 times book value with a quality book, except for two non-performing assets. “We were confident about the management quality and business. The stock surged over 50 per cent primarily on the back of Brookfield taking over the firm.”

Shares of Fortis Healthcare and IIFL Finance rallied 16 per cent and 20 per cent, respectively, in January.

Special situation table

Private equity and real estate investor Everstone Group on January 31 announced an agreement whereby Brookfield Business Partners, together with its institutional partners, is to invest Rs 1,450 crore in IndoStar Capital Finance.

Returns delivered by special situations does not look like sheer luck. Historical data shows the scheme has garnered annualised returns of 9.59 per cent since its inception on October 31, 2018.

Nippon India’s Emerging India delivered 11.80 per cent last month. Whirlpool of India, DCB Bank, VIP Industries, Relaxo Footwears, Dr Lal Pathlabs, Aarti Industries, IPCA Lab and Cholamandalam Investment were among the top holdings of the strategy as of December 31. The scheme had more than 10 per cent exposure each to consumer durables, banking and chemicals sectors.

Varun Goel, Head Equity, Nippon India AIF said, “We like to buy companies which have superior ROCE/ROEs, high growth potential, consistent earnings track record, good corporate governance and no share pledge.”

Ambit Capital’s Emerging Giants, Sundaram AMC’s SELF Portfolio, Centrum PMS’ Good To Great and Anand Rathi Advisors IMPRESS PMS advanced 10-12 per cent last month.

PMSes cater to wealthy investors with portfolio sizes exceeding Rs 50 lakh, and charge higher fees compared with mutual funds for their services.

Equirus Securities Long Horizon Fund, Unifi Capital’s BCAD, Edelweiss Focussed Smallcap, Centrum PMS Multibagger (Deep Value I), Phillip Capital’s Emerging India Portfolio, Unifi Capital’s Blended Fund- RANGOLI, Credent Asset Management Growth Portfolio and 2Point2Capital’s Long Term Value fund delivered 8-10 per cent returns last month.

Sebi data showed portfolio management services run by well-known investors including Basant Maheshwari’s Basant Maheshwari Wealth Advisers gained 3.35 per cent last month while Porinju Veliyath’s Equity Intelligence India generated 7.23 per cent.

Maheshwari has been avoiding midcaps and smallcaps altogether in recent times, as he does not expect the economy to fire in the foreseeable future.

In his recent interaction with ETMarkets.com before the Union Budget, he said there would not be any rally in midcaps and smallcaps until industrial growth hits 8 per cent, at the least. “People have their portfolios loaded with midcaps and smallcaps. They would expect them to do go up, but markets do not do what people expect them to do. Markets do what the underlying earnings tell them to do,” he said.

On the other hand, select largecap and sectoral funds – including Tata PMS Blue Chip, Sanctum Wealth Indian Olympians and Trivantage Capital Management's strategies including FIRST, SUPER SIX and Resurgent Financials Equities –have slipped marginally between 0.25 per cent and 1.40 per cent.
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