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30 nov 2022

Falling inflation and crude prices lift Nifty, but few PMS strategies outperform.

by Philip Shah
Falling inflation and crude prices lift Nifty, but few PMS strategies outperform.

The rally leading up to Diwali continued with indices moving up strongly in November as well. Falling crude oil prices and cooling inflation rates propelled the markets, with the Nifty rising by a strong 4.14% in November. The move was mostly led by large-cap stocks. Midcap and small-cap indices underperformed, making the rise a narrowly led rally. However, the BSE 500 delivered a 3.32% return for the month, though it was still lower than Nifty’s move. Foreign Institutional Investors (FIIs) net bought Rs. 22,546 crores worth of shares in November. In general, FIIs buy blue-chip index stocks, which may have led to Nifty’s outperformance. Green shoots of lower inflation in the US and Euro Zone aided positive sentiments.

However, it was a weak show from PMS players during the month as only 36 of the 308 (less than 1 in 8) strategies outperformed the Nifty. However, 255 strategies delivered positive returns in November.

Multi-cap PMS strategies dominated the list of top performers compared to other investment approaches. Funds with large-sized assets underperformed the indices in November.

Top 10 PMS Strategies of November 2022

From the 308 strategies tracked and analyzed by PMS Bazaar, here are the top 10 performers in November 2022.

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Multicap strategies dominated the top 10 performers list with four such names figuring in it.

The ACE Multicap strategy from ASIT C Mehta Investment was the best performer, delivering a staggering 13.54% during November. The PMS usually invests in 25 highly undervalued, high-quality stocks.

The second was the Wealth Builder strategy – which invests in a concentrated portfolio if stocks that are significantly below their intrinsic value – from Fractal Capital Investments, which delivered 9.06% during the month.

Next came the Dividend yield strategy of Green Portfolio, which delivered 9% returns in November. The PMS invests in 15-20 high dividend yield stocks. It aims to generate dividend income and capital appreciation.

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The following chart gives the returns of the top 10 PMS strategies in November 2022 and benchmarks these to the Nifty, which is depicted by the bar line.

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Category-wise performance of PMS providers

The following chart gives the chart of how strategies across market capitalization performed during the month of November. Thematic strategies delivered the best returns, while midcaps underperformed heavily.

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Among the 18 PMS strategies with Small-cap focus, 6 outperformed during the month. The category average return was 2.21%, while the BSE Small-cap delivered 2.44%

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Minerva India Under-served strategy from Right Horizons delivered the best returns in the category, at 6.46%. The India Opportunities Product from Aequitas Investment Consultancy with 5.75% return and the Diversified Long Term Value strategy from Counter Cyclical Investments with 5.63% returns took the second and third spots respectively in the small-cap category.

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Small & Midcaps

The 28 PMS strategies of the small & midcap category delivered 1.29% average returns in the month. Topping the charts was the Growth Fund from Green Lantern Capital, with 5.28% returns during November 2022, closely trailed by Abakkus Emerging Opportunities Approach from Abakkus Asset Manager at 5.10%. The third slot was taken by the Rising Star Opportunity strategy of Valentis Advisors, which delivered 4.73% returns.

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It was a relatively dull month for midcap PMS strategies as only 5 of the 21 schemes outperformed the Nifty Midcap 100 and the category delivered 0.88%.

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ACE Midcap from Asit C Mehta Investment Intermediates was the best of the lot and delivered 7.25% returns. The India Resurgent Portfolio Series III from JM Financial Services took the second slot with 3.31% returns in November, followed by Vallum India Discovery from Master Portfolio Services in the third place with 3.13% returns.

The following graph shows the category average return of midcap strategies and that of the Nifty Midcap 100 index for November 2022. alt text

Large and Midcap

The 11 large & midcap PMS strategies delivered 2.04% returns on average in November.

The top three performers were: Large & Midcap Strategy from Care Portfolio Managers (3.6%), Alpha Fund from Green Lantern Capital (3.33%) and Value Equity+ from LIC MF (2.9%).

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Though the Nifty and many large-cap stocks rallied sharply in November, most PMS strategies lagged benchmarks.

Only 2 of the 25 large-cap PMS strategies outperformed the Nifty, which delivered 4.14% during the month. The average returns for the category came in at 2.13%.

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Tulsian PMS was the top performer with 5.63% returns. The Large cap strategy of Acepro Advisors delivered 4.86% and came second. The third was the large-cap strategy of ICICI Prudential PMS.

The graph below gives the performance of large-cap PMS versus Nifty’s returns in November 2022. alt text


Though multi-cap strategies figured prominently among the top 10 performers, it wasn’t a great show overall.

Of the 152 funds in the category, only 27 outperformed the broader market BSE 500 index. While the category average return was 1.79%, the BSE 500 delivered 3.32%.

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The Wealth Builder strategy from Fractal Capital Investments led the charge with 9.06% in November. ICICI Prudential’s Value Strategy came second, delivering 6.72% returns. The YNG Strategy of Carnelian Asset Advisors was the next on the list with 6.3%.

The graph below gives the performance comparison of the PMS category and the benchmark BSE 500.

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The thematic category did reasonably in November 2022 with the average return for the segment coming in at 2.84%.

Green Portfolio’s Dividend Yield strategy, with 9% returns, came as the chart-topper. The Dawn strategy of Invesco with 4.36% came second. A distant third was the Index Fund from Green Portfolio.

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With the inflation trajectory on the decline over the past couple of months, there are expectations of RBI going slow or pausing on rate hikes in the near future. As earnings get back on track in a full COVID-free year, markets look poised for interesting action as we head into the new year.