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30 dec 2022

Markets end on a weak note in December, but 211 PMS strategies outperformed the Nifty.

by Philip Shah
Markets end on a weak note in December, but 211 PMS strategies outperformed the Nifty.

After a strong November, markets had a rather rough month in December, with all indices – large, mid, and smallcap – ending in the red. However, unlike in previous months, the BSE Small Cap and Nifty Midcap 100 fell less than the Nifty 50.

Though inflation abated a bit during the month, Central Banks around the world, including the RBI (Reserve Bank of India), raised interest rates. These hikes and the hawkish stance taken by the Federal Reserve meant that equity markets in India cracked. The fall was mainly an outcome of FIIs (Foreign Institutional Investors) being net sellers to the tune of Rs 14,231 crore in December.

Though most of the PMS strategies recorded a negative month, their performance was still reasonable. As many as 211 of the 309 strategies (nearly 7 in 10) managed to outperform the Nifty 50 in December.

In a volatile month, debt PMS strategies delivered relatively mild outperformance over the Nifty.

Top 10 PMS Strategies of December 2022

From among the 309 strategies that are tracked and analyzed by PMS Bazaar, the list of the top 10 performers in December 2022 is as follows.

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Small-cap strategies figured prominently in the list, with 3 of the top 10 performers coming from the category. In a weak month for equities, as many as 4 debt strategies featured in the top 10 best performers.

The India Rising SME Stars strategy of HEM Securities, which invests in small and medium-sized enterprises, topped the chart with 6.38% returns in December.

Next on the list was Green Portfolio’s Super 30 strategy, which invests in turnaround candidates or stocks with re-rating potential, with a 3.84% return.

The third best performer was the Aries Mid Yield strategy of Scient Capital, which delivered a 2.27% return during the month. This is a debt strategy focused on investing in securities rated between AA and BB.

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

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Category-wise performance of PMS players

The following chart presents details of how strategies across market capitalization performed during December. The large-cap strategy as a category underperformed the most with -a 3.22% return during the month. Mid and small caps did better than large caps. Thematic strategies fell the least, at -1.58% during December.

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In the small-cap category, of the 18 strategies tracked, 7 outperformed the BSE Small Cap. As mentioned earlier, the India Rising SME Stars strategy of Hem Securities was the best performer, with 6.38% returns during December.

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Molecule Ventures LLP’s Growth strategy was the second in terms of performance, with 1.52% returns. The third was Aequitas Investment Consultancy’s India Opportunities Product, which follows a mix of value, contrarian and growth strategies and invests in small and microcaps with above-average potential, with a 1.41% return in December. The performance of the category in relation to the BSE Small Cap is depicted in the graph below.

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Small & Midcaps

The category with 28 PMS strategies managed -2.46% in December, with all barring one delivering negative returns. Leading the pack was Silverarch’s Mid & Small Cap Equity Strategy with 0.28% returns. The Caterpillar strategy from Invesco, which invests in mid and small-cap stocks with the potential for re-rating, delivered -0.19% returns. The Emerging Leader Fund Strategy of Varanium Capital Advisors followed next, with -0.31% returns.

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Strategies focused on midcap stocks experienced a rather dismal month. Just 3 of the 21 schemes outperformed the Nifty Midcap 100 return of -1.65%. The category average return came in lower, at -2.9%. Emkay Investment Managers’ Pearls strategy topped the chart with -0.54% returns. The India Resurgent Portfolio Series III Strategy of JM Financial Services came next, and it fell much less than the midcap index and managed to record -0.86% returns in December. The third in the list with a -1.27% return was the NAFA Clean Tech Portfolio Strategy of NAFA Asset Managers.

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The graph below describes the relative performance of the midcap strategy versus the Nifty Midcap 100 index in December 2022.

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Large and Midcap

The average of the returns of 12 large & midcap PMS strategies was -2.88% in December. The top three performers were: Alpha Fund Strategy from Green Lantern Capital (-0.95%), Multifactor Equity from Motilal Oswal (-2.1%), and the All Weather Portfolio from Oro Asset Management (-2.3%).

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Given that the Nifty and large-cap stocks declined significantly during December, it was not surprising that the category had just one strategy delivering positive returns. The category average return was -3.22% during the month. As many as 14 of the 25 large-cap strategies outperformed the Nifty. The Exposure Equity Index Strategy from Agreya Capital Advisors, which involves buying options, delivered the top returns in the segment with a 0.61% return during the month. ICICI Prudential AMC’s large cap strategy came next with -0.38% returns. Asit C Mehta Investment Intermediates’ ACE 15 strategy, which invests in under-valued, high-quality stocks, came third with -2.4% returns during December.

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The bar charts below depict the large-cap category average with the returns of the Nifty during December 2022.

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Multi-cap strategies put up a somewhat reasonable show in December. Of the 151 funds in the category, 84 (or more than half the strategies) outperformed the broader market BSE 500 index. The category average return was -2.89%, while the BSE 500 managed -3.15%.

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ICICI Prudential AMC’s Value Strategy came out on top, delivering 2.03% returns. The Edge Strategy of Bonanza was next in line with 0.44% returns, followed by the Fundamental Value Fund Strategy of Itus Capital Advisors with 0.13% returns.

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

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The thematic category contained downsides better than the broader markets during December 2022. It was the best-performing strategy during the month, with a category average return of -1.58%.

Green Portfolio’s Super 30 strategy, with 3.8% returns led the pack. Focussed Corp Lenders (Plan B) Strategy from Trivantage Capital Management, which invests in equity and equity-related instruments of Indian Financial Institutions, was the next in the charts with a 0.2% return. The Rise strategy of Invesco with -0.7% return came third.

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Inflation has steadily declined in India and the developed markets during December. The early part of the earnings season has unfolded, with the IT pack delivering strong results. As the Union Budget looms around the corner, there will be much attention on the government’s taxation and spending proposals. As the markets put behind a sideways and volatile 2022 behind, the New Year opens with many possibilities and hopes for the equity markets.