In the run-up to elections, the Indian equity market saw increased volatility in May. Smallcap and PSU stocks saw the highest volatility. The broader Nifty 50 declined marginally by 0.3% in May, while sectors like Nifty Realty, Nifty Auto, and Nifty Consumer Durables gained by 4.7%, 4.2%, and 1.4% respectively. 

Realty stocks rose on the back of higher sales in Q4FY24 and rising property prices across metro and Tier-1 cities. Higher volumes led by electric vehicle and premium segment sales drove auto stocks higher.

Indian equity mutual funds saw a net inflow of Rs 34,697 crore in May, with sectoral and thematic funds receiving the highest inflows of Rs 19,213 crore. Largecap and midcap funds recorded inflows of Rs 663 crore and 2,606 crore respectively. With institutional investors moving away from large caps, the Nifty Midcap 100 rose 1.7% in the month, while the broader Nifty 500 saw a growth of 0.5%. Around nine new open-ended schemes were also launched during the month, which attracted Rs 10,040 crore in investments.

Stocks with increasing MF holding - Ashok Leyland, ABFRL, Apollo Tyres, Exide Industries, Ujjivan Small Finance Bank

Ashok Leyland – Margin expansion aided by lower raw material cost

Ashok Leyland, part of the Hinduja Group, manufactures a wide range of commercial vehicles and engines for industrial and marine applications. It is the second-largest commercial vehicle manufacturer in India and the fourth-largest manufacturer of buses in the world. 

Its volume growth in Q4FY24 has been robust at 20% YoY. However, revenues declined by 3.1% due to lower sales of M&HCV and LCV. The volumes were led by higher sales in the bus segment due to higher demand for school buses. Margins expanded by 310 bps YoY on account of lower steel prices.  Ashok Leyland plans to add 16 new models in the M&HCV segment on its electric vehicle platform. 

Fund managers who bought shares of Ashok Leyland

Fund managers who added shares of Ashok Leyland to their portfolios include Dhaval Gala and Dhaval Joshi for Aditya Birla Sun Life Transportation and Logistics Fund, Nitin Gosar for Bank of India Manufacturing & Infra Growth Fund, and Karthik Kumar and Mayank Hyanki for Axis Nifty Midcap 50 Index Fund. Fresh buys were done by Anish Tawakley and Vaibhav Dusad for ICICI Prudential Focused Equity Fund, and Pranav Gokhale and Pranav Gokhale for Canara Robeco Mid Cap Fund.

ABFRL’s cost control measures drive margin expansion

Aditya Birla Fashions & Retail (ABFRL) is a retail manufacturer of branded apparel and accessories. ABFRL has various clothing brands under it like Pantaloons, Louis Phillipe, Van Heusen, Peter England and Allen Solly. The firm operates through 2,679 stores spread across India. ABFRL’s lifestyle brand business contributes nearly 85% of the revenue. 

ABFRL’s consolidated revenue grew by 18.3% YoY in Q4FY24. The growth was led by store additions and new brands (Reebok and ethnic business). EBITDA margins improved by 163 bps YoY to 8.3%. The margin expansion was driven by the premiumization of products and cost control measures. The cost control measures include rationalization of the network, lower discounting and lower advertisement spending. The firm also plans to cut down its debt from Rs 2,900 crore currently to Rs 700 crore by the end of FY25.  

Fund managers who bought shares of ABFRL

Fund managers who added shares of ABFRL to their portfolios include Karan Doshi and Jaiprakash Toshniwal for LIC MF Value Fund, Swapnil Mayekar for Motilal Oswal Nifty Midcap 150 Index Fund, Himanshu Mange for Nippon India Nifty Midcap 150 Index Fund. Fresh buys were done by Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Fund, and Manish Gunwani and Sumit Agrawal for Bandhan Balanced Advantage Fund.

Apollo Tyres: Premiumisation and exports to aid revenue growth

Apollo Tyres (APOLLOTYRE), is a Gurgaon-based automotive tyre manufacturer. The firm is among the top 20 global tire manufacturers and reported Rs 25,531 crore annual revenue in FY24.

Apollo Tyres’ saw flat revenue growth (0.2% YoY) in Q4FY24. The subdued growth was on account of price rationalization in trucks, buses, and radial tires. The lower volumes in aftermarket and weak demand from commercial vehicles have limited the revenue growth in Q4FY24. However, exports reported a volume increase of 30% in the quarter. With the start of agricultural activity and the end of election season, the firm expects to see an uptick in commercial vehicles. The firm is also working on the premiumization of tires and cutting down on advertising expenses. This is expected to help in margin expansion in the near term.

Fund managers who bought shares of Apollo Tyres

Additional shares of Apollo Tyres were bought by Sankaran Naren and Manish Banthia for ICICI Prudential Equity & Debt Fund, S. Bharath and Ratish Varier for Sundaram Mid Cap Fund and Arjun Khanna and Nalin Bhatt for Kotak Infrastructure & Economic Reform Fund. Fresh buys were done by Ankit Jain for Mirae Asset Midcap Fund, and Bhavesh Jain and Bharat Lahoti for Edelweiss Balanced Advantage Fund.

Exide Industries: Venturing into lithium-ion battery manufacturing

Exide Industries (EXIDEIND) is a Kolkata-based auto part & equipment manufacturer with expertise in lead-acid and lithium-ion storage batteries and inverters. Its batteries find applications in automobiles, industries, home appliances and submarines. The firm generates 74% of its revenue from the automotive space.

Exide Industries Q4FY24 revenues grew by 13% YoY mainly driven by volumes. The firm reported an EBITDA margin expansion of 250 bps on account of lower lead cost (down by 2%) and a better mix of high-margin products. As a market leader in the storage battery space, Exide is focusing on EV batteries to gain a first-mover advantage. The firm has invested Rs 5,000 crore In FY24 and plans another Rs 1,000 crore in FY25. The plant is scheduled for operation by Q4FY25. It currently has an order book of Rs 600 crore for lithium-ion batteries. Exide Industries has partnered with China-based SVOLT Energy to ensure a steady supply of raw materials for this venture.

Fund managers who bought shares of Exide Industries

Fund managers who added shares of Exide Industries to their portfolios include Venugopal Manghat and Cheenu Gupta for HSBC Small Cap Fund Fund, Hardick Bora and Gaurav Chopra for Union Midcap Fund, Nishit Patel and Kewal Shah for ICICI Prudential Nifty Auto ETF, and Himanshu Mange for Nippon India Nifty Smallcap 250 Index Fund. Fresh buys were done by Sachin Relekar and Nitin Arora for Axis Value Fund.

Ujjivan Small Finance Bank: Diversification towards secured lending might contract margins

Ujjivan Small Finance Bank (UJJIVANSFB), headquartered in Kolkata, is a banking and finance firm that specializes in microfinance and MSME loans. It is the third largest small finance bank in India with a loan book of Rs 26,883 crores. It caters to 8.6 million customers through 752 branches. Around 58% of its branches are located in metro areas. The bank has a strong footprint in West Bengal, Maharashtra, Karnataka and Tamil Nadu. 

Ujjivan Small Finance Bank reported a 24% YoY growth in advances and a 23% growth in deposits for Q4FY24. The net interest margins have been stable at around 9% due to the repricing of the loans and the lower cost of funds due to the rating upgrade. However, in the near term, the bank is expected to see pressure on the margins as it moves towards the secured lending business. The bank has been slowly diversifying from mico-finance to housing, auto and SME segments. The bank plans to add 50 new branches in FY25. 

Fund managers who bought shares of Ujjivan Small Finance Bank

Fund managers who added shares of Ujjivan Small Finance Bank to their portfolios include Himanshu Mange for Nippon India Nifty Smallcap 250 Index Fund, Harsh Sethi for SBI Nifty Smallcap 250 Index Fund, and Murthy Nagarajan and Sailesh Jain for Tata Dividend Yield Fund. Fresh buys were done by Ravi Gopalakrishnan and Rohit Seksaria for Sundaram Small Cap Fund, and Manish Lodha and Abhinav Khandelwal for Mahindra Manulife Small Cap Fund.

Stocks with increasing MF holding - Engineers India, Cyient, Berger Paints, Bharat Dynamics, Aegis Logistics

Engineers India - Diversification to help revenue growth

Engineers India (ENGINERSIN): This PSU specializes in consulting services and engineering projects in oil, gas and petrochemical industries. It derives nearly 54% of its revenue from turnkey projects. The firm has a presence in the Middle East, Africa, and South Asia.

Engineers India is trying to diversify into new growth verticals like coal gasification, defense and transportation. Its network in the oil & gas industry has helped drive new project growth. The firm has an order book of Rs 7,823 crore, with 59% of the order book comprising consultancy services. It has guided an EBIT of 27% for consultancy projects and 4% for turnkey projects. The firm is expanding its footprint in the Middle East to take maximum advantage of the oil & gas project hub.

Fund managers who bought shares of Engineers India

Fund managers who added shares of Engineers India to their portfolios include Sanjeev Sharma and Vasav Sahgal for Quant Small Cap Fund, Dhaval Gala and Dhaval Joshi for Aditya Birla Sun Life PSU Equity Fund, and Nimesh Chandan and Siddharth Chaudhary for Bajaj Finserv Flexi Cap Fund. Fresh buys were done by Rohit Shimpi for SBI PSU Fund, and Venugopal Manghat and Cheenu Gupta for HSBC Small Cap Fund.

Cyient impacted by slower decision-making in the US and Europe

Cyient (CYIENT), is a software and services firm headquartered in Hyderabad with interests in global digital engineering and technology solutions. It specializes in geospatial, engineering design, IT solutions, and data analytics. Cyient has over 300 customers and a presence in 19 countries. It has annual sales of around Rs 7,213 crore. The US accounts for 43.7% of the revenue.

Cyient’s revenue growth moderated to 6.2% YoY in Q4FY24 due to lower revenue from (Digital Engineering and Technology) DET segment (1.7%). The revenue was impacted due to slower decision-making in the US and Europe. However, its design-led manufacturing (DLM) segment, reported 30.4% YoY growth. This surge was attributed to increased order intake from the aerospace and defense segments. The company reported 140 bps YoY EBIT expansion due to a drop in its attrition rate and increased resource utilization. Cyient won orders worth $200 million in the quarter. The firm's commentary indicates green shoots in the US, higher cost optimization deals with the UK and subdued demand in Europe.

Fund managers who bought shares of Cyient

Fund managers who added shares of Cyient to their portfolios include Arjun Khanna and Harish Bihani for Kotak Small Cap Fund, Meenakshi Dawar and Dhrumil Shah for Nippon India Flexi Cap Fund, Meeta Shetty and Kapil Malhotra for Tata Focused Equity Fund. Fresh buys were done by Abhishek Bisen and Arjun Khanna for Kotak Technology Fund, and Roshi Jain and Dhruv Muchhal for HDFC Flexi Cap Fund.

Berger Paints: Industrial and automotive paint drive growth

Berger Paints (BERGEPAINT), is a diversified consumer service firm with expertise in the manufacturing and retailing of paint and its allied products. The Kolkata-based firm is the second largest paint manufacturer in India with a manufacturing capacity of 1.27 million metric tonnes. The firm’s annual revenue stands at Rs 11,263 crores. 

In Q4FY24, Berger Paints revenue increased by 3.1% YoY even though its volumes increased by 13.9%. The lower revenue was on account of higher sales of low-value products like adhesives and admixtures. The firm also reduced prices by up to 5% on its value products. The firm intends to gain market share by adding new outlets and increasing ad spend. The firm saw increased demand from the automotive and industrial paint segments. The firm expects the housing paint demand to pick up in Q3FY24 post-monsoons.
 

Fund managers who bought shares of Berger Paints

Fund managers who added shares of Berger Paints to their portfolios include Nemish Sheth for Bandhan Nifty100 Low Volatility 30 Index Fund, Arun Agarwal and Nirman Morakhia for HDFC NIFTY Next 50 Index Fund, and Nishit Patel and Priya Sridhar for ICICI Prudential Nifty Next 50 Index Fund. Fresh buys were done by Sonam Udasi and Aditya Bagul for Tata India Consumer Fund, and Neeraj Kumar and Nidhi Chawla for SBI Equity Savings Fund.

Bharat Dynamics: Order book execution key to growth

Bharat Dynamics (BDL), is a PSU defense manufacturing firm with expertise in guided missile systems, underwater weapons and allied defense products. The firm has four manufacturing plants with three units located in Telangana and one in Andhra Pradesh. Bharat Dynamics has an annual revenue of Rs 2,731 crore.  

Bharat Dynamics saw revenue growth of 16.4% YoY in Q4FY24. The superior execution in the quarter was attributed to the healthier supply of key components for its products. The firm's order book is around Rs 19,500 crore. The management plans to execute the order book in the next five years. The firm has guided a revenue growth of 25% in FY25 with margins around 20%. The defense firm is expected to get a revenue boost from export orders for Akash Missile systems. It has also tied up with various foreign manufacturers like Thales, and Dassault to benefit from India’s defense offset policies.

Fund managers who bought shares of Bharat Dynamics

Fund managers who added shares of Bharat Dynamics to their portfolios include Harsh Sethi for SBI Nifty Midcap 150 Index Fund, Dhimant Kothari for Invesco India PSU Equity Fund and Sanjay Chawla for Baroda BNP Paribas Focused Fund. Fresh buys were done by Ashish Naik and Pratik Tibrewal for Axis Multi Asset Allocation Fund and Mihir Vora and Aakash Manghani for TrustMF Flexi Cap Fund.

Aegis Logistics - new storage terminals to boost topline

Aegis Logistics (AEGISLOG) is an oil & gas logistics firm with expertise in the import, distribution and storage of LPG and petrochemicals. The firm operates via designated terminals at Indian ports. Aegis Logistics has an LPG storage capacity of 1.14 lakh metric tonnes. The company also distributes autogas via its retail outlets.

In Q4FY24, its revenue declined by 14.3% YoY to Rs 1,900 crore. The lower revenue was on account of lower  LPG sourcing (-7%) and distribution (-8%) volumes. However, the firm reported a margin expansion of 730 bps mainly on account of the lower cost of raw materials. The firm has also acquired storage terminals (41,000 Kilo liter) at Mangalore port. This is apart from the 2,31,000 kilo liter storage terminals Aegis Logistics is building across India. It also plans to spend Rs 500 crore constructing a storage terminal for Ammonia (36,000 MT) in Gujarat.  

Fund managers who bought shares of Aegis Logistics

Fund managers who added shares of Aegis Logistics to their portfolios include Sanjeev Sharma and Vasav Sahga for Quant Small Cap Fund, Himanshu Mange for Nippon India Nifty Smallcap 250 Index Fund, Nishit Patel and Priya Sridhar for ICICI Prudential Nifty Smallcap 250 Index Fund, and Vasav Sahgal and Ankit A. Pande for Quant Infrastructure Fund. Fresh buys were done by Sanjeev Sharma and Vasav Sahgal for Quant Flexi Cap Fund.