You know the experience of watching someone blow air into a balloon? They puff and puff and sometimes they keep going even when the balloon looks about to pop. That's what investors have been feeling, with the Indian indices.
We've seen yet another all-time high for the Nifty 50 this week: the benchmark index has hit its all-time high for the eleventh week in a row. The bull run is now a full gallop, and the Nifty is within kissing distance of 25,000 as of this writing.
US markets on the other hand, have recently struggled as the tech-heavy Nasdaq 100 fell 3.6% on Friday, the most since 2022. Tesla and tech stocks took a beating as investors and analysts reconsidered the promise of AI. The S&P 500 and Dow Jones also fell on Friday, down 2.3% and 1.2%. Bloomberg called the sudden drop ‘scary and long overdue’ – the S&P 500 had been on a 17-month streak without a drop of 2%, unseen since 2007.
But Indian markets seem unbothered by US weakness, and managed to hit another all-time high on Monday. This long upward trend has investors biting their nails. This nervousness is also showing up in the portfolios of superstars. Investors like Kacholia and Singhania sold much more than they bought in Q1FY25.
Which sectors are superstar investors worried about? And which are the few stocks that they bought?
In this week’s Analyticks,
- Watching the balloon: Superstar investors think twice before adding new companies to their portfolios
- Screener: Promoters that increased pledged shares QoQ in Q1FY25
Let’s dive in.
Superstar investors go on a selling spree as markets hit all-time highs
Superstar investors have turned picky with their investments as the market heats up.
Many top superstar investors saw their portfolio net worth fall in Q2FY25 (till July 29) – the trend is visible in the new shareholding data for Q1FY25. This is not because of underperformance but because superstar investors have sold their holdings in many companies. The portfolio net worth of Ashish Kacholia, Sunil Singhania, and Vijay Kishanlal Kedia has fallen at least 7.5% in Q2FY25 till July 29, as they went into selloff mode.
Major superstar investors see net worth fall in Q2 after major sells
Dolly Khanna’s portfolio on the other hand, has risen the highest (9.6%) as this superstar investor increased her stake in many companies, and bought new stakes in five companies. Rakesh Jhunjhunwala’s portfolio, now managed by Rare Enterprises, has remained flat as the team did not make any big changes, but sold small stakes in seven companies.
Ashish Kacholia, who favors small-cap companies, sold his stake to below 1% in seven companies, and made only one new buy. Singhania and Kedia did not buy any new stocks in the past quarter, and each cut stakes to below 1% in two companies.
Singhania and Kedia did not add any new stock to their portfolios in Q1
In all, the superstars in focus bought new stakes in only nine companies (Khanna bought in five) and sold their stakes to below 1% in 21 companies.
Superstar investors are selling overvalued and loss-making companies
When it comes to sells, it’s a particular kind of stock that is being dropped: the stock is either in the PE sell zone (trading higher than their historical PEs) or is making losses.
Only two stocks in the sell list are exceptions here, being profitable and trading in the PE buy zone – Shankara Building Products and Route Mobile. Kacholia and Mukul Agarwal sold their stakes in Shankara Building Products to below 1%.
Most stocks sold by superstar investors trade in PE Sell Zone
Superstar investors sell industrials, metals stocks
General Industrials and Metals and Mining sectors dominate the sell list, followed by Consumer Durables and textiles. Interestingly, Goldman Sachs noted that American hedge funds are also selling off industrial stocks, amid concerns around GDP growth for the US and China.
General Industrials sector dominates the superstar sell list
The sells list also includes loss-making companies (negative net profit TTM) – Reliance Infra, Sterlite Technologies, Barbeque-Nation, and Dish TV India.
Expert investors are buying new stakes in financially strong, moderately valued and rising companies
Three themes come to light when looking at the buy list – strong financials, rising share prices and moderate value.
Barring Paytm and Super Sales India, all other companies’ Trendlyne Durability score is in the ‘Good’ category. A high Durability score indicates good and consistent financial performance: stable revenues, profits, cash flows and low debt.
Superstar investors are buying rising stocks with good financial health
Paytm is the only loss-making company that features in the list, bought by Akash Bhanshali. During the same quarter, Softbank, which had an initial investment in Paytm of around $1.55 billion, exited its position at a loss of 12%-14%.
Nile and Dilip Buildcon top the list with a durability score of 80 and 75. These two companies’ momentum and valuation scores are also in the good category, making them ‘Strong Performers’.
Investors look to ride the momentum on moderately valued stocks
Eight out of the nine companies bought recently have PE TTM lower than their sector PE.
In addition, the PEG ratio, which includes the net profit growth component into the PE ratio, is lower than one for all companies except Ujjivan. A PEG ratio of less than one can indicate undervaluation. Paytm (loss-making) and newly listed Awfis Space Solutions, are excluded in this analysis.
Most stocks bought by superstar investors are trading below their sector PE TTM
The final theme among the stocks in the buy list is Momentum - a critical factor in a bull market. All stocks except Ujjivan Small Finance Bank have risen in the past quarter.
Only Ujjivan Small Finance Bank underperforms Nifty 50 in the past quarter and year
Ashish Kacholia’s new bet Awfis Space Solutions, which was listed on May 30, is already up 81.6%. Top performers over the past year include Tinna Rubber, Emkay Global and Nile.
Rakesh Jhunjhunwala’s old bet Titan outshines in long term growth
When we look at long-term bets by these superstars, late Rakesh Jhunjhunwala’s Titan and Mukul Agarwal's Neuland Labs come out on top. Titan and Neuland Labs respectively contribute to 33.7% and 5.7% of their portfolios.
Best performing long-term holdings: Jhunjhunwala's Titan, Mukul Agarwal's Neuland Labs
Bhanshali’s Gujarat Fluorochemicals (27.3% of total holding value) and Kedia’s Atul Auto (24.7% of total holding value) on the other hand, have failed to beat the benchmark index in terms of share price performance since they bought these stocks. However, both these superstar investors’ net worth has almost doubled in the past year, due to high performance in their other holdings and fresh buys in new stocks.
India's superstar investors have become famous for their patience during the ups and downs of the market. The recent, increased selling in their portfolios could be an important signal. Warren Buffett once said, ‘Be fearful when others are greedy’. And right now, valuations of many stocks look greedy indeed.
Screener: Promoters increasing pledged shares QoQ in Q1FY25
Banking and construction stocks see a rise in promoter pledges in Q1FY25
As the latest shareholding data for companies came in, we took a look at stocks that saw a significant rise in promoter-pledged shares (which indicates higher loans taken out against stock). This screener identifies companies where pledged shares by promoters are greater than 20% and have increased QoQ in Q1FY25.
The screener has stocks from the banking, cement & construction and metals & mining sectors. Major stocks that appear in the screener are 360 One Wam, IRB Infrastructure Development, Max Financial Services, Kalpataru Projects, India Cements, Hindustan Zinc, and Lloyds Metals & Energy. Most of the stocks in the screener have seen their promoters also sell stakes over the past quarter.
360 One Wam stands out with the highest rise of 9.2 percentage points QoQ in promoter-pledged shares. This takes the promoter pledge to 40.5% of their total holding in Q1FY25. Yatin Shah holds a 3.7% stake in the company and has pledged 73.6% of his holding, while Kush Family Private Trust and Kyra Family Private Trust have a 1.5% stake each and have pledged 100% of their holding.
IRB Infrastructure Developers’ promoters increased their pledges by 6.4 percentage points in Q1FY25. This takes the company’s promoter pledge to 55.3% of their total holding in the company. IRB Holdings holds a 29.5% stake in the company and has pledged 56.9% of its total holding.
You can find some popular screeners here.
