Indian equity markets initially celebrated Donald Trump’s win in the US presidential race, rising 1.1% on Nov 6—only to take a sharp U-turn the next day, falling 1.2% as investors took a closer look at his policy plans, which include aggressive tariffs on imports. Trump in his first term was a temperamental head of state, and he has already complained about India's trade policies: "India is very big with tariffs". Investors are in wait and watch mode this time around.
Indian markets have been moody since September 26. Foreign institutional investors (FIIs) kicked off a historical selling spree, dragging indices downward. Amid the turbulence, domestic institutional investors (DIIs) have emerged as the market’s backbone, stepping in with record-breaking purchases and mitigating the slide.
But, there are still worrying signs. Inflation has been simmering since July, and may have now boiled over.
In October, India’s CPI inflation rose 6.21%, surpassing the expected 5.8% due to high food inflation.
Indian superstar investors were wary of rising markets and soaring valuations in Q1FY25. And in hindsight, they may have made the right decision. The same caution is visible in Q2, as these investors slowed the pace of investments and sold considerably more than they bought.
Which hidden gems did superstar investors bet on? And which sectors are they worried about?
In this week’s Analyticks,
- Superstar investors get picky in their investments
- Screener: Stocks in the PE buy zone with high durability scores and price upsides
Let’s dive in.
Superstar investors shuffle their portfolios, trim stakes
Superstar investors made strategic portfolio changes in Q2FY25, with selling activity once again outpacing buying.
Many top superstar investors saw their net worth decline (as of November 11), as recent shareholding data for Q2FY25 came in. The drop is from volatility in key holdings, and strategic selling across multiple companies.
Notably, the net worth of Rakesh Jhunjhunwala and Associates (now managed by Rare Enterprises), Ashish Kacholia, and Dolly Khanna fell by over 10% as of Nov 11.
Major superstar investors see net worth fall in Q3 after major sells
Vijay Kedia stands out with a 9.4% net worth increase, driven by strong gains in his top holdings—Tejas Networks and Neuland Laboratories—which rose over 20% in the past month.
Dolly Khanna’s portfolio suffered the largest decline, falling 22.3%, as she reduced her stake in several companies, and with her top holding, Chennai Petroleum Corp, experiencing a 31% drop.
Rare Enterprises also saw its portfolio fall, primarily due to stake reductions. Of the 27 stocks in the portfolio, 17 saw a reduction, with Tata Motors and Baazar Style Retail being the only ones where Jhunjhunwala's stake increased.
Stocks sold by superstar investors outnumber the new buys
Overall, superstar investors appear cautious, showing restraint in both new acquisitions and increasing stakes in existing holdings. Top investors trimmed stakes in 91 companies while adding to just 37.
Ace investor Sunil Singhania, for instance, refrained from buying new stocks or increasing his stake in any company, instead reducing holdings in 13 out of 22 companies.
New stakes: Superstars pick financially strong and newly listed companies
Two major themes come to light when looking into the buy list of superstars – strong financials and newly listed companies.
Barring E2E Networks and ASM Technologies, all other companies’ Trendlyne Durability score is in the ‘Good’ category. A high Durability score indicates consistently good financial performance: stable revenues, profits, cash flows and low debt. Newly listed companies that don’t have durability scores are not included in this list.
Superstar investors are buying rising stocks with good financial health
20 Microns and POCL Enterprises top the list with a durability score of 90. When overall DVM scores are considered, POCL Enterprises and Emkay Global Financial Services come out on top as they score a ‘Good’ rating across all three metrics, making them both ‘Strong Performers’. Interestingly, these three top-scoring stocks were added by Dolly Khanna to her portfolio in Q2.
Even the big investors got sucked into the IPO frenzy in Q2
One major theme among the buys is superstar investors picking newly listed companies, as the IPO frenzy continues in India, especially the Small and Medium Enterprise (SME) segment.
Out of 19 new buys, six are newly listed companies. Only Baazar Style and Stanley Lifestyles were Main Line IPOs among these six newly listed stocks.
All six companies listed in the green, with TAC Infosech’s listing gains at 187.3%. But here’s the kicker - four out of these six companies have fallen in the past quarter, with TBI Corn declining 32.7%. Volatility in the market has affected newly listed companies as well.
Superstar investors’ new buys in IPOs lag in the past quarter after listing above issue price
The top performer here is Vijay Kedia’s SME stock, TAC Infosec. This software and services company has risen 47.2% in the volatile past quarter.
A focus on performance: Superstar investors sell overvalued, underperforming small and mid-caps
A major theme across the sell list by superstars is that these stocks are either in the sell zone (trading higher than their historical PEs) or are underperforming the Nifty 50 in the past quarter.
Only three companies among the 19 sells are in the PE buy zone - Arvind Fashions (Sold by Akash Bhanshali), Mitsu Chem Plast (sold by Porinju Veliyath) and Ujjivan Small Finance Bank (sold by Dolly Khanna).
Most stocks sold by superstar investors trade in PE Sell Zone
Interestingly, all stocks sold were small or mid-cap companies. In addition, half of the stocks sold have underperformed the benchmark index in the past quarter.
Textiles sector dominates the superstar sell list
Textiles apparel & accessories and commercial services & supplies sectors dominate the sell list, followed by chemicals & petrochemicals.
The sells list also includes a loss-making company (negative net profit TTM) - Deepak Spinners.
Vijay Kedia’s 2020 bet Tejas Networks stands out
When we look at long-term bets by these superstars, Vijay Kedia’s Tejas Networks and Mukul Agrawal's Neuland Labs come out on top. Tejas Networks and Neuland Labs contribute 2.5% and 7.9% of their portfolios respectively.
Best performing long-term holdings: Kedia’s Tejas Networks, Mukul Agrawal's Neuland Labs
Interestingly, high-performing Neuland Labs is Kedia’s third-largest holding as well, leading to a sharp rise in Kedia’s portfolio over the past two years.
Bhanshali’s Gujarat Fluorochemicals (32% of total holding value) and Khanna’s Chennai Petroleum Corp (22% of total holding value) on the other hand, are lagging since they bought these stocks. However, Bhanshali's net worth has almost tripled in the past two years due to high performance in their other holdings and fresh buys in new stocks.
Screener: Stocks in the PE buy zone with high durability scores and target price upsides
Auto stocks have the highest Forecaster target price upside
In the current volatile market environment, where the Nifty 50 has fallen 3.4% over the past month, we look at stocks in the buy zone with strong durability and high target price upside. This screener shows technically strong stocks with high durability scores and target price upside.
Stocks from the automobile & auto components, FMCG, software & services, and cement & construction sectors appear in the screener. The most noticeable stocks in the screener are Signatureglobal (India), Tata Motors, Emami, EIH, Motherson Sumi Wiring India, 3M India, ACC, and Quess Corp.
Tata Motors has one of the highest Forecaster target price upsides, of 38.6% over the next 12 months. But the stock has declined by 27.6% over the past quarter due to lower retail sales. This cars & utility vehicles company has a good Trendlyne Durability score of 85 and a Piotroski score of 8, indicating still healthy financials. ICICI Direct believes that the company’s healthy margins, return ratios, and low leverage on the balance sheet will help in long-term growth.
Emami also features in the screener with a Forecaster target price upside of 26.6% over the next 12 months. This personal products company also has a good Trendlyne Durability score of 80 and a Piotroski score of 9. Anand Rathi expects the company’s growth trajectory to continue on the back of a niche product portfolio, leading market position, recovery in rural sales (50-55% of total revenue), improvement in distribution, direct-to-consumer (D2C) brands, and digital ventures. Emami has also struggled in the volatile market, and its price has fallen 17.3% over the past quarter, underperforming the FMCG sector by 8.2 percentage points.
You can find some popular screeners here.
