The Nifty hit a fresh record high in June but rose just about 0.9 percent, however, the bigger performers were the schemes extended by portfolio management services (PMS) in the small and midcap space.
The Nifty midcap 100 and Nifty smallcap indices were up 4-5 percent in June. Most schemes that outperformed the Nifty50 were from the small, midcap or multicap space.
As many as 217 PMS schemes of the 238 tracked by PMSBazaar.com, an online portal for comparing portfolio management services (PMSes), outperformed the Nifty50 in June, data shows.
PMSes cater to wealthy investors with portfolio sizes exceeding Rs 50 lakh. The professional fee structure is also different from a regular mutual fund (MFs). They invest in quality businesses and companies through Indian equities with an objective to grow wealth over the long term.
The top five schemes that outperformed the Nifty50 were Bonanza Value that delivered over 14 percent returns, ROHA Asset Managers–Emerging Champions 13.13 percent, Green Portfolio’s Dividend Yield Fund 11.21 percent, Motilal Oswal Focused Midcap 10.74 percent and Carnelian Asset Advisors shift strategy 10.61 percent.
All the five schemes gave more than 10 percent returns in June, outperforming the Nifty, Nifty midcap and Nifty smallcap indices as well.
A look at the top holdings of these funds can give investors a peek into the stocks fund managers are betting big on. The list should only be considered as a reference to shortlist stocks for their own portfolio and not buy recommendations.
We have collated a list of 25 stocks–five each from the top 5 schemes–filtered based on the returns delivered in June. Data has been collated from PMSBazaar.com.
Multicap theme Bonanza gave more than 14 percent returns. Its top holdings are Tata Elxsi, Rajratan Global Wire, Bajaj Finance, Vaibhav Global and PI Industries.
Roha Asset Managers’ Emerging Champion Portfolio primarily invests in the small & midcap stocks. Its top holdings include Globus Spirits, Venky’s India, Vardhman Textiles, Triveni Engineering, and Grindwell Norton.
How should investors approach small, midcap space?
The BSE midcap and smallcap indices have outperformed the benchmark indexes in 2021. The BSE midcap index rose over 26 percent, while the smallcap index gave over 40 percent return in the same period compared to about 12 percent rise seen in the Nifty, data collated on July 19 shows.
“Small and midcap indices have outperformed on a one and two years basis, however, their performance is largely in line to the Nifty index on a three-year basis. In our view, if the risk-adjusted returns between large and midcaps are similar, then one should prefer higher allocation towards large caps, which is the case currently,” Harshad Borawake, Head-Equity Research, Mirae Asset Investment Managers India Pvt. Ltd, said.
“On an aggregate basis, while some of the stocks are trading at highest-ever valuations and one should be careful there, but there are also some unique companies with a strong moat,” he said.
Midcaps typically offer opportunities on a bottom-up basis, and can form about one-fourth or one-third of overall allocation, Borawake said.
Seshadri Sen, Head of Research, Alchemy Capital Management, agrees on being cautious on the broader market space.
“We would advise investors to take a little more care when investing in small and mid-cap stocks, as they often tend to carry higher risk,” he added.
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