December 2022 saw the Nifty 50 index fall by 3.5%. Throughout the month, stock prices across many sectors saw a correction and mutual fund managers seized this opportunity to buy stocks with upside potential. These include many small- and mid-cap companies that are likely to post a good set of numbers in the coming quarters. The sectors in focus range from IT services and healthcare to logistics and NBFCs.

The stocks in this article are screened from the Nifty 500 and have seen at least four schemes buy more than one lakh shares each this month. 

M&M Financial Services - Rising sales of tractors aid loan growth in Q3FY23

M&M Financial Services is a Non-Banking Financial Company (NBFC) engaged in providing asset finance through its pan-India branch network. It is instrumental in financing its group company M&M’s vehicles, including tractors. 

The rising sales of M&M’s tractors and HCVs (Heavy Commercial Vehicles) in the last quarter have seen a rise in the M&MFS loan book. The company, in a press release, said that it has recorded a disbursement of approximately Rs 4,650 crore in December 2022, delivering a 67% YoY growth.

It added that the growth in disbursement was helped by a positive macro environment. Q3FY23 disbursements stands at approximately Rs 14,450 crore, recording a growth of 80% YoY. Year-to-date (YTD) disbursements are approximately Rs 35,750 crore, registering a YoY growth of 95%.

Fund managers who bought shares of M&M Financial Services

M&M Financial Services was added by Shreyash Devalkar and Hitesh Das to Axis Midcap Fund Growth, Mohit Jain and Dinesh Balachandran to SBI Contra Fund Regular Payout Inc Dist cum Cap Wdrl, Hiten Shah to Kotak Equity Arbitrage Fund Growth, and R Janakiraman and Sandeep Manam to Franklin India Prima Fund Growth.

Nykaa - Stakes of early stage investors get distributed among institutional investors

Nykaa (FSN Ecommerce Ventures) is engaged in the business of manufacturing, selling and distributing beauty, wellness, fitness, and allied beauty products on their own online platform Nykaa.com, or through e-commerce websites, m-commerce apps, as well as physical stores, stalls, general trade and modern trade. Nykaa has been in the limelight ever since its listing about a year ago for being one of the profitable online businesses listed on the exchanges. However, it has disappointed investors with a fall of more than 50% since listing. 

Many early stage investors and PE funds are exiting this stock and it is being picked up by institutional investors via block deals. Last month, private equity firm Lighthouse India sold 18.44 million equity shares worth Rs 336 crore through a block deal. Domestic mutual funds, including Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund and ICICI Prudential Mutual Fund, and foreign portfolio investors like BofA Securities, BNP Paribas Arbitrage and Society Generale were the block deal buyers, according to available data.

Fund managers who bought shares of Nykaa

Gaurav Misra and Gaurav Khandelwal for Mirae Asset Large Cap Fund Regular Growth, Rajat Chandak and Sharmila D’mello for ICICI Prudential Flexicap Fund Regular Growth, Kayzad Eghlim and Nishit Patel for ICICI Prudential Nifty Next 50 Index Fund Growth and Atul Penkar and Dhaval Gala for Aditya Birla Sun Life Tax Relief 96 Pyt of Inc Dis cum Cap Wdrl added this stock to their schemes.

NLC India

NLC India is engaged in the business of mining lignite, and generation of power using lignite, as well as renewable energy sources. Key triggers for long-term prospects include higher capacities in power as well as mining to boost profitability and capitalize on the country’s strong power demand. 

NLC is adding a 3200 MW coal-based thermal plant (3x800MW phase-I and 1x800MW phase-II) in Talabira, Odisha. Management expects the plant to be commissioned by 2027-28. NLC’s renewable energy capacity is at 1.4GW, out of its total capacity of 5GW. About 4.5GW is in the planning and tendering stage, and the company aims to reach 6GW in renewable capacity by 2030 to achieve a healthy balance with its thermal plants.

Fund managers who bought shares of NLC India

Additions to schemes were made by Sanjay Chawla and Miten Vora to Baroda BNP Paribas Flexi Cap Fund Regular Growth, Sanjay Chawla and Pratish Krishnan to Baroda BNP Paribas ELSS Fund Regular Plan Growth, Abhinav Khandelwal and Manish Lodha to Mahindra Manulife Small Cap Fund Regular Growth, and Dhimant Shah and Tanay Gabhawala to ITI Multi Cap Fund Regular Growth.

Maruti Suzuki - Change in strategy expected to help retain market share

Maruti Suzuki India is a subsidiary of Suzuki Motor Corporation, Japan. It is the leader in the passenger cars segment with over 40% market share of the total PV sales in India.

The company is now focused on larger cars (SUV segment) with the launch of ‘Grand Vitara’, the new ‘Brezza’ and upgrades to ‘XL6’ and ‘Ertiga’. The management expects the contribution from the small/mini segment to reduce and that of SUVs and compact SUVs to increase in tune with changing customer preferences.

It is planning a capacity expansion to 2.5 mn units, which includes 0.1 mn units of brownfield capacity in Manesar (Haryana) by FY24. A new facility at Kharkhoda in Haryana will contribute from FY25 onwards (0.25mn units).

Fund managers who bought shares of Maruti Suzuki

Anish Tawakley and Vaibhav Dusad for ICICI Prudential Bluechip Fund Growth, Rajat Chandak and Sharmila D’mello for ICICI Prudential Flexicap Fund Regular Growth, Rajeev Thakkar and Raunak Onkar for Parag Parikh Flexi Cap Regular Growth and Gaurav Misra and Gaurav Khandelwal for Mirae Asset Large Cap Fund Regular Growth added this stock to the schemes.

Jindal Stainless - Removal of export duty to aid stainless steel industry

Jindal Stainless is engaged in the business of manufacturing stainless steel flat products in Austenitic, Ferritic, Martensitic and Duplex grades. The product range includes ferro alloys, stainless steel slabs, hot rolled coils, plates and sheets, and cold rolled coils and sheets.

Two recent developments are expected to be beneficial for the stainless steel sector– withdrawal of export duty to aid value-added exports, and imposition of anti-dumping duty on stainless steel seamless tubes and pipe imports from China for five years.

Fund managers who bought shares of Jindal Stainless

Additions to schemes were made by Sanjeev Sharma and Vasav Sahgal to Quant Small Cap Fund Growth, Samir Rachh and Kinjal Desai to Nippon India Small Cap Fund - Growth, Vasav Sahgal and Ankit Pande to Quant Tax Plan Growth and Fatema Pacha and Manish Lodha to Mahindra Manulife Multi Cap Badhat Yojana Regular Plan Growth.

LTI Mindtree - Smooth completion of merger makes it India’s  fifth-largest IT company

LTI Mindtree is an IT services company created from the merger of L&T Infotech and MindTree. It offers clients a range of IT services like application development, maintenance and outsourcing, enterprise solutions and platform-based solutions.

The merger was completed last month and witnessed a smooth transition of key management personnel. Vinit Teradesai (formerly CFO at Mindtree) has been designated as CFO of the combined entity. Sales leadership has been split between Sudhir Chaturvedi (formerly President Sales at LTI) and Venugopal Lambhu (formerly President Global Markets at Mindtree).  Nachiket Deshpande (formerly COO at LTI) is now COO of LTIM.  

It has emerged as the fifth-largest IT Services player in India, in terms of market capitalization post-merger. This should improve its ability to tap larger deals (of over USD100m) as compared to limited contracts of this scale at present. 

Fund managers who bought shares of LTI Mindtree

Neelesh Surana and Ankit Jain for Mirae Asset Emerging Bluechip Fund Growth, Ankit Jain for Mirae Asset Midcap Fund Regular Growth, Karthikraj Lakshmanan for UTI Mastershare Unit Regular Plan Payout Inc Dist cum Cap Wdrl and Shriram Ramnathan and Cheenu Gupta for HSBC Aggressive Hybrid Fund Growth added the stock to the schemes.

Ajanta Pharma - Management upbeat about closing FY23 on a high note

Ajanta Pharma is a pharmaceutical company primarily involved in developing, manufacturing and marketing specialty finished dosages. It produces a comprehensive range of specialty products targeting different therapeutic segments.

After last quarter’s results were announced, the management guided for an EBITDA margin of 26% in H2FY23. It intends to file 10-12 ANDAs in FY23 and launch 1-2 in the US market.  The management expects its Asia business to grow over 20% and India business to improve in high-teens on a YoY basis in FY23. 

Fund managers who bought shares of Ajanta Pharma

Additions to schemes were made by Sankaran Naren and Dharmesh Kakkad for ICICI Prudential Value Discovery Fund Growth, Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Fund - Growth as well as Nippon India Pharma Fund - Growth, and Mahesh Patil and Dhaval Shah for Aditya Birla Sun Life Multi-Cap Fund Regular Growth.

VRL Logistics - Price hikes and hiving off bus business key positives 

VRL Logistics is one of India’s leading logistics service providers, operating in goods transport, passenger transport and courier services, apart from the air and wind power generation business. 

VRL recently implemented a price hike of 5% in its goods freight business after nearly two years. The last hike was done in April 2021. The price hike has been implemented for categories and products that form nearly 60% of total volumes. 

It has also received shareholder approval for the sale of its bus business. This would allow the company to focus on the high-growth goods business. The proceeds from the sale should help the company fund capex in the goods transport segment.

Fund managers who bought shares of VRL Logistics

Harish Bihani and Sharmila D’mello for ICICI Prudential Transportation and Logistics Fund Regular Growth, Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Fund Growth, Shriram Ramanathan and Cheenu Gupta for HSBC Aggressive Hybrid Fund Growth and Harish Bihani and Sharmila D’mello for ICICI Prudential Smallcap Fund Growth added the stock to the schemes.

Sapphire Foods - A good festive season will reflect in Q3FY23 results

Sapphire Foods India is principally engaged in the franchise business of KFC, Pizza Hut and Taco Bell.

With good festive season sales, Q3FY23 results are expected to beat street expectations. The company’s decision to take price hikes lower than material cost increases is resulting in good operating leverage. With its Sri Lanka business getting better from September 2022 onwards, the impact on EBITDA margin is likely to reduce in the coming quarters.

Fund managers who bought shares of Sapphire Foods

Additions to schemes were made by Gaurav Misra for Mirae Asset Focused Fund Regular Growth, Neelesh Surana and Ankit Jain for Mirae Asset Emerging Bluechip Fund Growth, Harish Bihani and Sharmila D’mello for ICICI Prudential Smallcap Fund Growth and Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Fund - Growth

Rainbow Children’s Medicare - Rising interest from Superstar investors

Rainbow Children’s Medicare is a leading chain of multi-specialty pediatric, and obstetrics & gynecology hospitals in India. It operates 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.

It was listed on the exchanges in May 2022 and has delivered positive returns to investors since its listing. There is a growing interest in this stock from some of the superstar investors. According to the shareholding pattern filed by the company for the September quarter, Ashish Kacholia held 10,44,211 equity shares, (a 1.03% stake). This was the first quarter that this investor raised his stake in this hospital chain.

Fund managers who bought shares of Rainbow Children’s Medicare

Sankaran Naren and Dharmesh Kakkad for ICICI Prudential Value Discovery Fund Growth, Vinit Sambre and Jay Kothari for DSP Small Cap Fund Regular Plan Growth, Dharmesh Kakkad and Sharmila D’mello for ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund Growth and Meenakshi Dawar and Akshay Sharma for Nippon India Value Fund - Growth added this stock to the schemes.