By Ketan SonalkarThe month of June saw the Nifty 50 index declined by nearly 5% to 15780 levels, which is the highest fall in 2022. Many sectors continued the downtrend that commenced in January and then witnessed a steep fall in June.
Even during the sharp fall in June, mutual funds bought into sectors and stocks that are likely to be outperformers over the next few quarters. Let’s look at some of the stocks which were bought by fund managers of mutual funds in June. These include names across the financial services industry including an AMC (asset management company), a general insurance company, some picks from the specialty chemicals sector as well as a leading carmaker.
Tech Mahindra - Domain expertise with 5G services is a competitive advantage
Tech Mahindra, among the top five IT services companies in India, provides IT services for telecommunication equipment manufacturers, telecom service providers, software vendors, and systems integrators.
Tech Mahindra was on the radar of mutual funds in the last month also and is one of the top buys by mutual funds for a second consecutive month. Trendlyne Forecaster’s average of consensus estimates shows revenue growth of 15.2% in FY23, despite the expected slowdown in revenues for the large IT sector.
Bharti Airtel and Tech Mahindra announced a strategic partnership to set up a joint 5G innovation lab to co-develop and market 5G use cases in India. With the government’s plan for the auction of the 5G spectrum in place, Tech Mahindra will be a direct beneficiary.
Fund Managers who bought shares of Tech Mahindra
Fund managers who added to their respective schemes include Hiten Shah forKotak Equity Arbitrage Fund Growth, Amit Sharma and Shrawan Kumar Goyal for UTI Arbitrage Fund Regular Plan Growth, Krishan Kumar Daga and Arun Agarwal forHDFC Arbitrage Fund Wholesale Plan Growth, and Sailesh Jain forTata Arbitrage Fund Regular Growth
ICICI Lombard General Insurance - International travel and revised regulations offer growth triggers
Private general insurance company ICICI Lombard offers various insurance products covering travel, home, health and motor segments.
With life returning to normalcy post the pandemic, the business has multiple growth triggers, with purchases of two-wheelers and cars expected to rise in FY23. With international travel resuming, travel insurance could also get a boost.
Another opportunity for general insurance companies is the recent change in regulations by the IRDAI (Insurance Regulatory and Development Authority of India), where the insurance cover of the vehicle would vary based on the driving style of the owner. This gives options for insurance companies to structure products with differentiated premiums. Another advantage is the introduction of floater policies for vehicles belonging to the same individual owner for two-wheelers and private cars. In case, a customer has more than one two-wheeler or four-wheeler vehicle, he can opt for this cover for all the vehicles from the same insurance company.
Fund Managers who bought shares of ICICI Lombard General Insurance
Shares of ICICI Lombard General Insurance were added by R.Srinivasan to SBI Focused Equity Fund Growth, Hiten Shah to Kotak Equity Arbitrage Fund Growth, R.Srinivasan and Mohit Jain to SBI Flexicap Fund Regular Growth and Milind Agrawal to SBI Banking & Financial Services Regular Growthschemes respectively.
Godrej Consumer Products - Declining raw material prices likely to aid margins
Godrej Consumer Products, one of India’s leading household and personal care companies, also has a global presence in other countries like Indonesia, Africa, the US, and the Middle East.
The company in its recent update on its Q1FY23 operational performance indicated that it is likely to deliver double-digit growth in key markets of India, Africa, the US, and the Middle East. The only country that is likely to underperform is Indonesia.
The entire FMCG industry was plagued with rising raw material costs for more than a year. But over the last two months, prices of raw materials like palm oil dropped almost 40% from their peak levels. In addition, a good monsoon in India is expected to bode well for all FMCG companies. This could have led fund managers to load up on the company’s shares.
Fund Managers who bought shares of Godrej Consumer Products
Fund managers that added Godrej Consumer Products to respective schemes include Hiten Shah for Kotak Equity Arbitrage Fund Growth, Sumit Agrawal for IDFC Focused Equity Fund - Regular Plan - Growth, Anand Radhakrishnan and R. Janakiraman for Franklin India Bluechip Fund Growth and Priyanka Khandelwal and Anish Tawakley for ICICI Prudential MNC Fund Regular Growth.
Grasim Industries - Expansion plans across all segments
Grasim Industries, the flagship company of Aditya Birla Group, is a diversified business in cement, textiles, retail, and chemicals. The company delivered a standout FY22 result with its highest ever annual revenues at Rs 96,522 crore and the highest ever net profit at Rs 12,246.5 crore.
During Q4FY22, in the textiles segment, it commissioned its 600 TPD (tonnes per day) VSF (Viscose Staple Fibre) capacity. It plans to increase its VSF capacity by 48 TPD with minimal capex across its three plants. In the chemicals segment, the Company added a capacity of 142 KTPA (kilo tonnes per annum) in Rehal and Balabhadrapuram.
The company has ambitious plans for its upcoming paint business and acquired five land parcels for plants for which they have spent about Rs 579 crore.
Fund Managers who bought shares of Grasim Industries
Shares of Grasim were added by Hiten Shah to Kotak Equity Arbitrage Fund Growth, Taher Badshah and Dhimant Kothari to Invesco India Contra Fund Growth, Neeraj Kumar to SBIArbitrage Opportunities Fund Regular Growth and Bhavesh Jain and Dhaval Dalal toEdelweiss Arbitrage Fund Regular Growthschemes respectively.
Maruti Suzuki - New models to help retain market share
Maruti Suzuki, among India’s leading car makers with over 50% market share of the domestic car market, is facing tough competition from players like Tata Motors and Hyundai and plans to introduce at least six new models over the next two years. These include new SUV models as well as upgraded versions of their existing models.
Another factor that is working in its favour is that the reopening of the economy is likely to lead to higher sales in FY23. This will be helped by the easing up of shortages of semiconductor chips in Q1FY23.
Fund Managers who bought shares of Maruti Suzuki
Maruti Suzuki saw buying interest from fund managers Shreyash Devalkar and Hitesh Das for Axis Bluechip Fund Growth, Hiten Shah Kotak Equity Arbitrage Fund Growth, Harsha Upadhyaya for two schemes, Kotak Equity Opportunities Fund Growth and Kotak Flexicap Fund Growth.
Bata India Ltd - FY23 revenue set to cross pre-pandemic levels
Bata India is the largest retailer and leading manufacturer of footwear in India with over 1,700 retail stores spread across India. The company has ambitious expansion plans and will continue to set up its own stores across the country. The focus would be to increase the share of the franchise network to over 500 in the next 2-to-3 years.
After a subdued two years due to the pandemic, the management expects FY23 revenues are expected to surpass the pre covid revenues of FY19. Also with a return to normalcy, with schools and offices reopening, the next few quarters are expected to deliver higher revenues.
Fund Managers who bought shares of Bata India
Shares of Bata were added by Jinesh Gopani and Hitesh Das to Axis Focused 25 Fund Growth, Anupam Tiwari and Sachin Jain to Axis Multicap Fund Regular Growth, Mahesh Patil to Aditya Birla Sun Life Focused Equity Fund Growth and Gopal Agrawal and Sankalp Baid toHDFC Large and Mid Cap Fund Growthschemes respectively.
Havells - Fall in commodity prices to aid margins in FY23
Havells India is a leading player in electrical consumer goods in India, with key verticals in switchgear, cables & wires, lighting fixtures, and consumer appliances. FY22 was a good year for the company with all segments’ revenues growing above 20%. It posted its highest ever annual revenue and profit in FY22 at Rs 14,098 crore and Rs 1,196.5 crore, respectively.
During Q1FY23, the drop in prices of commodities such as steel, aluminum, and copper should aid the margin growth of many companies in this space. Havells India is heavily dependent on copper as raw material and the drop in prices should see it improve margins from Q1FY23 onwards. In addition, the company is on an aggressive store expansion spree in the urban and rural markets with differentiated store formats.
Fund Managers who bought shares of Havells
Fund managers who added to respective schemes include Hiten Shah for Kotak Equity Arbitrage Fund Growth, Neelesh Surana and Ankit Jain for Mirae Asset Emerging Bluechip Fund Growth, Neelesh Surana for Mirae Asset Tax Saver Fund -Regular Plan-Growth and Venugopal Manghat and Praveen Ayathan forL&T Arbitrage Opportunities Fund Regular Growth.
Sudarshan Chemicals - Global demand for specialty chemicals bode well
Sudarshan Chemicals, a leading player in the Indian colour pigment industry with around 35% market share, is also among the top four players globally in this space. Its portfolio includes more than 4,000 varieties of products.
The company delivered its highest-ever annual revenues in FY22 at Rs 2,205 crore, however, net profits declined YoY by 7.9% at Rs 130 crore. The company is in an expansion mode for its pigment business with a planned capex of Rs 750 crore from FY20 to FY22. Of this, projects worth Rs 520 crore were completed in FY22 and projects worth Rs 210 crore are expected to be completed by Q3FY23. The management expects additional revenues of around Rs 1,500 crore once these units achieve full utilisation over the next 2-3 years.
Fund Managers who bought shares of Sudarshan Chemicals
Additions to respective portfolios were made by Anupam Tiwari and Hitesh Das to Axis Small Cap Fund Regular Growth, Priyanka Khandelwal and Harish Bihani to ICICI Prudential Smallcap Fund Growth and Ankit Jain to Mirae Asset Midcap Fund Regular Growth.
HDFC AMC - Trying to regain lost market share
HDFC AMC, part of the HDFC Group, is among the largest and most profitable asset management companies in India. It had an AUM (assets under management) of around Rs 4.3 lakh crore as of March 31, 2022. Being one of the early movers in the industry, its strong distribution network, with 228 branches and over 75,000 empanelled distribution partners, are its strengths. The company, however, has been losing its market share in the past few years.
Despite its poor performance on the stock market, where it fell by 37% over the last year, HDFC AMC is seeing high buying interest from mutual funds for the second consecutive month. In the competitive world of the AMC business, with new players being added almost every month, fund managers seem to be betting on a profitable, established AMC.
Even with a lacklustre performance in FY22, the company’s revenue is growing consistently. It posted its highest-ever annual revenues in FY22 at Rs 2,433.2 crore. It is also a very high return business with a net profit margin of above 50% over the last three years closing. In FY22, its net margin was 65.8%.
Fund Managers who bought shares of HDFC AMC
Fund managers who added shares of HDFC AMC include R. Janakiraman and Venkatesh Sanjeevi forFranklin India Equity Advantage Fund Growth, Anand Radhakrishnan and R. Janakiraman for Franklin India Bluechip Fund Growth, Kayzad Eghlim and Priyanka Khandelwal for ICICI Prudential Equity Arbitrage Fund Regular Growth and Venugopal Manghat and Praveen Ayathan forL&T Arbitrage Opportunities Fund Regular Growth.
Anupam Rasayan - Top performer among specialty chemicals
Anupam Rasayan is among the leaders in custom synthesis and manufacturing of specialty chemicals in India. The company commenced business as a partnership firm in 1984 and has, over the years, evolved into a player in custom synthesis and manufacturing life science-related specialty chemicals and other specialty chemicals.
The company has an enviable profile in the specialty chemicals industry with numbers that are higher than the industry average. Its five-year revenue CAGR till the end of FY22 was 29.3% and net profit at 34.1%. The long-term contracts with customers are expected to aid the company to grow at a similar pace as in the last five years.
Fund Managers who bought shares of Anupam Rasayan
Shares of Anupam Rasayan were added by Sanjeev Sharma and Vasav Sahgal to Quant Active Fund Growth, S.Bharath and Ratish Varier to Sundaram Mid Cap Growth and Sudhir Kedia and Rohit Seksaria to Sundaram Multi Cap Fund Growthschemes, respectively