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January is named after Janus – the Roman god of gates and doorways, who could see both forward and backward at the same time. And this month, we look back to understand what lies ahead of us.

Although the absolute returns for Indian markets were low in 2022, they outperformed the MSCI Emerging Markets and MSCI World indices by more than 20% over the year. Indian equities performed better than these global peers for the third year in a row, thanks to retail investors and buying by domestic funds. 

The story does not end here. According to Prashant Nair, Deputy Director at CNBC-TV18, Indian benchmark indices have now generated positive returns for the seventh consecutive year. 

However, many market analysts feel this dream run is done. Indian markets face multiple challenges in 2023, including high valuations, slowdown in key export markets, chances of fresh Covid waves and additional interest rate hikes. 

Before we draw up fresh trading strategies for 2023, let’s explore some themes that  delivered handsome returns for investors in a difficult year like 2022. These will give important cues to investors and prepare us for a volatile 2023. 

In this week’s Analyticks:

• Momentum superstars:: High momentum stocks which generated big returns in 2022
• Bruce Lee stocks: Stocks delivering consistent returns and growth since the past three years
• MF and Promoter favourites: Growth stocks bought by mutual funds or promoters in the past four quarters

Let’s get into it.

Momentum superstars screener: Fertilizer stocks and small banks fly high

This momentum screener selects stocks with a Trendlyne Momentum score of over 70, which have generated superlative returns of more than 30% in the past year. Among these, Fertilisers and Chemicals Travancore (FACT) enjoys the highest momentum score and multiplied investors’ wealth by more than 2.5X in 2022.

Fertilizer stocks have been buzzing in trade. Higher prices of agricultural commodities due to tight supplies helped the realizations of agrochemical and fertilizer makers. Reports suggesting that the government might increase the subsidy on urea in the upcoming budget have also worked in their favour. 

FACT has enjoyed especially high buying momentum thanks to its stellar financial performance in H1FY23, and capacity expansion plans.

Another stock riding high on its near-term store expansion plans is Kalyan Jewellers. Strong demand trends in the 2022 peak festive season also lifted the spirits of this counter.

Westlife Development outperformed its larger QSR peers in 2022, owing to its superior quarterly growth and ambitious growth targets. The company hopes to triple its sales to roughly Rs 4,500 crore via healthy same-store sales growth and higher store expansions in the next five years.  

Small-cap banks are another category seeing high momentum scores, with 35% returns to investors in the past year. Most of the stocks here are public sector banks, which gained mileage due to a strong revival in credit growth, cleaner balance sheets and attractive valuations in 2022. Banks like UCO Bank, Punjab & Sind Bank and South Indian Bank more than doubled investors’ wealth in the past year.  

However, analysts like Ambit Capital and Dalal & Broacha are sceptical about the continued outperformance of PSU bank stocks in 2023. They have run up quite a bit, and valuations of some stocks are ahead of their expected growth and return ratios. 

Bruce Lee stocks: Consistent growers like Tube Investments and Varun Beverages emerge as big wealth compounders

American martial artist Bruce Lee once said that “long-term consistency trumps short-term intensity”.  The comment about martial arts holds true for stock markets as well. Consistent growth stocks have rewarded investors with higher returns time and again.

Companies like Varun Beverages and Tube Investments of India have grown their profits at a CAGR of over 30% in the past three fiscal years. They multiplied investors’ wealth at a whopping rate of over 60% between 2019 and 2022 end. 

Varun Beverages has steadily expanded its distribution reach into newer geographies, and added new products to its portfolio. The company also took advantage of the sudden jump in out-of-home consumption post the omicron wave. It more than doubled its profits on a TTM basis and also doubled investors’ money in 2022. 

Tube Investments has been diversifying its product portfolio away from the auto sector, which is cyclical in nature. The company managed to post robust growth between FY19-FY22, a period of downcycle for the auto space. It staged a successful turnaround of CG Power in FY22, which is now driving its higher growth along with its export markets. 

PI industries is another player which has benefited from the consistent growth of its export business over the past few years. It also clocked strong revenue growth in the past few quarters on robust volumes. The company was a top industry outperformer in the past year.

Emerging as the dark horse in the telecom sector, Bharti Airtel staged a smart recovery post the slowdown in FY16-FY19, and returned to the black in FY22. Healthy subscriber addition, market share gain in 4G segment and the robust rise in average revenue per user aided its financial growth. 

Smallcap capital goods stocks have also surprised investors with their consistent returns and net profit growth in the past three years. These companies benefited from strong order inflows as investments revived in railways, defence, infrastructure, metals and mining, and energy sectors. RHI Magnesita India and Timken India emerged as the fastest growers and wealth compounders within this group. 

MF and Promoter favourites: Mutual funds and promoters picked auto and bank stocks in 2022

Given the solid growth of passenger and commercial vehicle wholesales post April 2022, mutual funds and promoters picked up stakes across auto OEMs and auto ancillaries. Mutual Funds added the highest stake in Rolex Rings. This small-cap auto stock got listed in August 2021 and generated returns of over 50% in the past year. 

Promoters also picked up auto ancillaries, based on the improved outlook of the sector. A promoter entity held by the Minda family picked up over 2.5% stake in UNO Minda in the September 2022 quarter. The company has a couple of capex projects in lighting and alloy manufacturing over the medium term. 

Mahindra CIE Automotive was also among the top promoter picks in 2022 and has returned over 50% to its investors. Its Spanish promoter entity raised nearly 5% stake, while M&M cut over 2% stake in the company in 2022.

Axis Bank, Bandhan Bank and HDFC Bank have emerged as the most bought stocks by mutual funds in the past four quarters, while Axis Bank has been the top industry outperformer in terms of financial growth in Q2FY23. It has grown its net interest income the fastest among larger peers and is the top analyst pick for 2023. 

Even though the IT sector was battered in 2022, mid-tier IT company Coforge came out as the top pick by mutual funds. The company has maintained a robust QoQ revenue growth trajectory and also sustained its margins at 17% levels in a difficult period. 

Thomas Cook (India) was among the most bought small-cap stocks by promoters in 2022. Healthy surge in travel demand to both domestic and international destinations may have prompted promoters to raise more than 6.5% stake in the company.  

You can find some popular screeners here.

1. United Spirits: This alcoholic beverage company’s share price has risen nearly 10% since it announced its Q2FY23 results. United Spirits comfortably beat Trendlyne’s forecaster estimates in both revenue and net profit. According to Trendlyne’s comparison tool, United Spirits outperformed its peers United Breweries, Radico Khaitan and Globus Spirits in YoY revenue and net profit growth in Q2.  

Despite a recent run-up in the share price, United Spirits is in the PE Buy zone and features in a screener for stocks in the PE Buy Zone with reasonable durability and rising momentum scores. 

Strong volume growth of 13% YoY in its premium and above segment drove revenue growth in Q2. However, volumes from the popular segment remained flat YoY. This is in line with the management’s guidance as it is changing the product mix to high-margin premium & above segment, which contributed nearly 80% of the total revenue in Q2. 

The management aims to derive 90% of its revenue from the premium segment in the near term. As part of this premiumisation drive, the company sold 32 popular brands amounting to Rs 372 crore in Q2FY23. These brands accounted for about 14% of the sales in H1FY23–meaning sales from this segment could see a YoY decline in H2FY23. However, with new premium product launches, margins are expected to improve. In Q2, gross margins fell 560 bps YoY to 39.5% due to double-digit inflation in raw material prices. The management said input cost inflation will continue in Q3FY23 as well due to the rise in glass manufacturing and Extra Neutral Alcohol (ENA) costs. 

2. Hindalco Industries: This aluminium manufacturer gained nearly 5% since announcing its Q2FY23 results on November 11. This rise in its stock price comes despite a 35.5% YoY drop in its net profit. It also missed Trendlyne’s Forecaster profit estimates by 14.4%. The street’s optimism around the company comes on the back of its aluminium production reaching record highs amid high input costs.

The business outlook for the firm looks healthy as the London Metal Exchange (LME) aluminium prices are expected to rise and demand for aluminium remains strong. This confidence in the company’s prospects is echoed by brokerages as well. Over the past month, it witnessed four broker target price upgrades and one broker recommendation upgrade.

The management expects the firm’s margins to expand in the coming quarters on better coal availability, as its captive coal mines start contributing effectively. This will bring down energy costs in the medium-to-long term. According to ICICI Securities, capacity expansion at Utkal Alumina will lead to a further fall in input costs for the company.

The management says it expects a robust demand environment in India, but a slowdown in the US may be a concern. ICICI Securities sees the Indian market driving growth for the company in the near-to-medium term. The company has allocated a capex of Rs 2,500 crore for the rest of FY23, which it plans to finance with its cash flows and not take on any debt. 

3. Tata Motors: The commercial vehicles manufacturer fell almost 5% following its Q2FY23 results on November 9. The company reported a loss of Rs 944.6 crore and 29.7% YoY rise in revenue to Rs 79,661.4 crore. It was backed by growth in revenues from Jaguar Land Rover, commercial vehicles and passenger vehicles segments. 

Shailesh Chandra, Managing Director, said the company remains vigilant about the evolving demand and supply situation and will stay active to take swift actions while focusing on further improving profitability. 

The company beat Trednlyne’s Forecaster estimates for revenue by 2.4% while net profit missed the forecaster estimates. Prabhudas Lilladher maintains ‘Buy’ rating on the company with a target price of Rs 520. The brokerage believes that the company’s likely market share gains in the PV segment led by a revamped portfolio, customer preference for SUVs and rising EV penetration along with the revival in Jaguar Land Rover and strong order book will benefit and drive free cash flow generation. 

Bringing in more business, the company’s commercial vehicles segment won an order for 1,000 buses from Haryana Roadways. The 52-seater fully built BS6 diesel buses will be supplied to the state in a phased manner. The stock also features on a screener of top Indian exporters in listed companies.

Meanwhile, Jaguar Land Rover’s Chief Executive Officer Thierry Bolloré resigned from the position due to personal reasons on November 17. 

4. Trent: This retailing company witnessed robust sales during the recently ended quarter. Although revenue was up 66% YoY to Rs 1,929 crore, its rise in profit was marginal at 0.5% YoY (Rs 93 crore). While its margins declined due to inflationary pressures, Trent’s revenue growth was backed by festive demand and in-store sales. It outperformed the industry. 

Noel Tata, Chairman of Trent, said the company’s fashion concepts have displayed encouraging growth momentum in Q2FY23. He added that Trent continues to expand its reach with vigour, and reinforce lifestyle offerings across concepts, categories and channels.

Brokerages like ICICI Direct, Axis Direct and Motilal Oswal are optimistic and give it a ‘Buy’ call on the back of the retailer’s robust performance and growth prospects. They expect Trent to add over 200 stores across various brands in the next two-three years. They believe that brands like Zudio and Star will drive growth in the coming years. 

While comparing Trent with its peer Aditya Birla Fashion and Retail using Trendlyne’s Stock Comparison tool, it outperformed in 30 out of 42 parameters, including revenue and net profit QoQ growth. 

The stock features in a screener for companies with strong annual EPS growth.

Trendlyne’s Forecaster estimates Trent’s revenue to grow 42.7% and EPS, 76.3% in FY23. 

5. Aster DM Healthcare: This healthcare facilities provider's share price fell over 18% in three trading sessions after it announced Q2FY23 results. The company's net profit fell 57% YoY and missed Trendlyne's Forecaster estimates by a significant margin. Net profit fell despite a 12.5% rise in revenue, mainly due to a sharp fall in the Gulf Cooperation Council (GCC) clinics and losses incurred by new hospitals in GCC. As a result, this company comes up in a screener of companies that posted a decline in quarterly net profit with a falling profit margin (YoY). 

Aster DM derives nearly 75% of its revenue from the GCC. The company has an established business in the GCC but has been expanding in India through an asset-light model. Revenue from hospitals in India rose 18.7% YoY in Q2, while GCC hospitals' revenue increased 8.2%. In addition, Indian hospitals boast higher operating profit margins or OPM (18.3%) than GCC hospitals (13.9%). 

To grab this opportunity in India, Aster DM has allocated a significant portion of Rs 600 crore capex planned for FY23 to increase bed counts in India. In order to strengthen its presence in South India, the hospital company inked a deal with Tirupathi-based Narayanadri Hospital & Research Institution in October to manage its hospital operations. This is in line with management's guidance of adding over 500 beds in India over FY23.

Another company expanding its footprint in South India is Krishna Institute of Medical Sciences (KIMS). According to Trendlyne’s comparison tool, KIMS beats Aster DM in YoY revenue and net profit growth in Q2. However, Aster DM hopes to leverage its multiple growth levers such as its pharmacy business and diagnostics business in GCC and India to drive top line growth. 

Trendlyne's analysts identify stocks that are seeing interesting price movement, analyst calls, or new developments. These are not buy recommendations.

October of 2022 saw the benchmark indices Nifty 50 rise 5.37% and Nifty Bank 6.93%. Both of these indices are now trading close to their all-time highs. With such massive gains, it was not surprising that mutual fund managers chose to add up on banking stocks with potential returns. Some other sectors that saw buying were logistics, auto ancillary and speciality chemicals.

Samvardhana Motherson - Gets boost from revival in the auto sector 

Samvardhana Motherson, formerly known as Motherson Sumi, is an auto component manufacturer which supplies the global PV (passenger vehicle) industry with wiring harnesses, vision systems (mirrors) and plastic body parts.

Q2FY23 results were encouraging for the company with it registering its highest-ever quarterly revenues at Rs 18,354.8 crore. Considering the expanding market for EV components, the company has also taken steps to expand its production capacity. 

In September 2022, it acquired 100% stakes in Japanese company Ichikoh Industries at an enterprise value of Japanese Yen (JPY) 5.2 billion. The transaction includes Ichikoh’s mirror business (development and manufacturing of automotive mirrors and associated products) in Japan and China, catering largely to Japanese original equipment manufacturers (OEMs)

Fund managers who bought shares of Samvardhana Motherson

Fund managers who added shares of Samvardhana Motherson to their portfolios include Hiten Shah forKotak Equity Arbitrage Fund Growth, Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Fund - Growth, Kinjal Desai and Ashutosh Bhargava for Nippon India Tax Saver (ELSS) Fund - Growth, and Sailesh Raj Bhan and Kinjal Desai for Nippon India Large Cap Fund - Growth.

Zee Entertainment - Growing market share and impending merger pique interest

Zee Entertainment is one of the largest listed media companies in India. It owns and operates 49 TV channels across 11 languages and also an OTT app Zee5.

In Q2FY23, the TV network’s viewership share was 16.4%, improving from 16.1% in Q1FY23, with a revised content strategy driving viewership in Hindi and Tamil. It also continues to gain viewership in Marathi among regional channels. 

Future growth triggers include higher adoption of OTT subscriptions under Zee5 and unlocking synergies with the proposed merger with Sony, for which the company has received conditional approval from the CCI. It expects the merger to be completed by Q4FY23.

Fund managers who bought shares of Zee Entertainment

Additional shares of Zee Entertainment were added by Sankaran Naren and Dharmesh Kakkad to ICICI Prudential Value Discovery Fund Growth, Mahesh Patil toAditya Birla Sun Life Frontline Equity Fund Growth, Sankaran Naren and Sharmila D’mello toICICI Prudential Focused Equity Fund Growth and Neelesh Surana and Ankit Jain to Mirae Asset Emerging Bluechip Fund Growth.

BHEL - Strength in order visibility over the next few years

BHEL, a public sector entity, is India’s largest engineering company and dominates the supply of equipment for power plants in India. The company’s products include gas turbines, generators, thermal sets, diesel shunters and other power plant equipment.

Its order inflow in Q2FY23 was robust at Rs 12,000 crore, with the announcement of the 2x660 NTPC Talcher win. Management expects revival of the thermal order pipeline with ~5 GW of expected annual order for the next five years. Order intake for the industrial segment was up 78% YoY to Rs 22,800 crore in Q2FY23, which included supply of locomotives and propulsion equipment in the transportation segment and transmission equipment among others.

Fund managers who bought shares of BHEL

Fund managers who added shares of BHEL to their schemes include Vinay Sharma and Kinjal Desai for Nippon India Focused Equity Fund - Growth, Krishan Kumar Daga and Arun Agarwal for HDFC Arbitrage Fund Wholesale Plan Growth, Atul Bhole and Laukik Bagwe for DSP Dynamic Asset Allocation Fund Regular Growth, and Venugopla Manghat and Praveen Ayathan for L&T Arbitrage Opportunities Fund Regular Growth.

IndusInd Bank - Improving performance this quarter aided by continual expansion

IndusInd Bank is part of the Hinduja Group. Its consumer finance division provides loans for vehicles, property and so on, while its corporate banking division offers a wide range of products to small and medium enterprises (SMEs) and large firms.

The bank posted a good set of numbers in Q2FY23. Its quarterly revenues were the highest ever at Rs 10,719.2 crore and net profits rose to Rs 1805.2 crore, a YoY increase of 57.4%. Gross NPAs also reduced significantly to 2.11% in Q2FY23.

IndusInd Bank continues to invest in physical and digital resources and has added 55 branches, 2,700 employees in banking and 3,650 employees in vehicles and microfinance and distribution this year. 

Fund managers who bought shares of IndusInd Bank

Addition of shares of IndusInd Bank was done by Hiten Shah for Kotak Equity Arbitrage Fund Growth, Priya Ranjan and Rahul Baijal for HDFC Top 100 Fund Growth, Priya Ranjan and Anil Bamnboli for HDFC Balanced Advantage Fund Growth, and Atul Penkar and Dhaval Gala for Aditya Birla Sun Life Tax Relief.

Canara Bank - Part of the PSU banks revival and growth story

Canara Bank is the third largest public sector bank in India. Among PSU banks, it has had a stellar run on the stock exchanges with its price nearly doubling in the past five months from the lows it made in June 2022.

Like many other PSU banks, Canara Bank also saw a significant improvement in its business over the past few quarters. In the latest quarter, Q2FY23, its revenues grew to an all-time quarterly high of Rs 27,358 crore, a YoY increase of 14.5%. Its net profit was also the highest in the past 10 quarters at Rs 2,705.6 crore, a YoY increase of 151.8%. Meanwhile, gross NPAs fell to 2.19% in Q2FY23 from 3.21% in Q2FY22.

Fund managers who bought shares of Canara Bank

Buying interest for Canara Bank came from Aniruddha Naha and Vivek Sharma forPGIM India Midcap Opportunities Fund Regular Growth, Sailesh Raj Bhan and Kinjal Desai Nippon India Multi Cap Fund - Growth, Mitul Kalawadia and Anand SharmaICICI Prudential PSU Equity Fund Regular Growth, and Vinay Sharma and Kinjal Desai Nippon India Banking & Financial Services Fund Growth.

RBL Bank - Bouncing back after a few lackluster quarters

RBL Bank, a private sector bank with a nationwide network of 435 branches, offers various services, including corporate and institutional banking, commercial banking, retail banking, agricultural development banking and financial market access.

It reported a 5.5x YoY jump in net profit to Rs 200 crore in Q2FY23, aided by a 63% decline in provisions. There was a pick-up in loan growth, up 12% YoY and 4% QoQ to Rs 62,900 crore. Within the retail lending segment, housing loans improved 35% QoQ and the MFI portfolio rose  22%. Credit cards grew at a steady pace of 4% QoQ. The share of credit cards stands at 23% of total loans.

RBL Bank has plans to launch its loan products for two-wheelers, used cars and Gold in Q3FY23. Overall, the bank is targeting a loan growth of 15% in FY23.

Fund managers who bought shares of RBL Bank

Fund managers who added shares of RBL include Kinjal Desai and Ashutosh Bhargava toNippon India Small Cap Fund - Growth, Kinjal Desai and Anand Gupta to Nippon India Arbitrage Fund Growth, Sonam Udasi and Abhinav Sharma to Tata Flexi Cap Fund Regular Growth, and Sanjeev Sharma and Vasav Sahgal to Quant Small Cap Fund Growth.

Delhivery - Path to profitability on the horizon

Delhivery, the largest fully-integrated logistics player in India by revenues, provides logistics services, including express parcel, e-commerce delivery and heavy goods delivery. Its network includes 122 gateways, 21 automated sort centres and 93 fulfilment centres.

In Q2FY23, its revenue from services was Rs 1,796 crore, up 22% YoY from Rs 1,474 in Q2FY22. Loss after tax in the same period narrowed down to Rs 254 crore from Rs 643 crore in Q2FY22. Overall, the company’s adjusted EBITDA loss reduced to Rs 125 crore in Q2FY23 on a sequential basis from Rs 217 crore in Q1FY23. As chances of profitability improve, there is growing interest in the stock from domestic institutions.

Fund managers who bought shares of Delhivery

Shares of Delhivery were added to respective portfolios by R Srinivasan and Mohit Jain for SBI Flexicap Fund Regular Growth, Priya Ranjan and Roshi Jain for HDFC Flexi Cap Fund Growth as well asHDFC Focused 30 Fund Growth, and Harish Bihani and Sharmila D’mello for ICICI Prudential Transportation and Logistics Fund Regular Growth.

Biocon - Acquisitions and international deals could improve company’s health

Biocon is a biopharmaceutical company. It develops therapy for chronic diseases such as autoimmune disease, diabetes and cancer. It has developed and introduced novel biologics, biosimilars, differentiated small molecules and affordable recombinant human insulin and analogues into the market. 

Biocon via its subsidiary, Biocon Biologics, will acquire the global biosimilars portfolio of Viatris. It expects the deal with Viatris to close in the second half of the current financial year. Through this deal, Biocon will gain Viatris’ global biosimilars business, whose revenues are estimated to be $1 billion next year, along with its portfolio of in-licensed biosimilar assets. This is an important deal for Biocon because it gives the Bengaluru-based company access to Semglee, an insulin brand.

The company also announced signing a strategic out-licensing agreement with Japanese pharmaceutical company Yoshindo Inc. for commercialising two of its pipeline biosimilar assets in the Japanese market. The company is in talks with Japanese regulators for data on two clinical assets and looks to commercialise the same across different markets.

Fund managers who bought shares of Biocon

Buying interest in Biocon was seen from Hiten Shah for Kotak Equity Arbitrage Fund Growth, Neelesh Surana for Mirae Asset Tax Saver Fund -Regular Plan-Growth, Sailesh Jain for Tata Arbitrage Fund Regular Growth, and Neeraj Kumar and Arun R for SBI Arbitrage Opportunities Fund Regular Growth.

Prestige Estates - Expanding footprint across the country

Prestige Estates is India’s largest developer in terms of booking value for FY22. Most of their projects are executed in Bengaluru and Hyderabad. The company has entered into Mumbai and NCR as well and is targeting aggressive growth in these geographies.

Prestige Estates has reported pre-sales in value terms at Rs 3,511 crore in Q2FY23, up 66% YoY. In volume terms, bookings increased to 4.55 million square feet (msf). Collections rose 68% YoY to Rs 2,603 crore in Q2FY23 and it launched five projects spanning 7.39 msf this quarter.

Fund managers who bought shares of Prestige Estates

Additions to respective schemes were made by Neelesh Surana and Ankit Jain to Mirae Asset Emerging Bluechip Fund Growth, Ankit Jain to Mirae Asset Midcap Fund Regular Growth, Neelesh Surana to Mirae Asset Tax Saver Fund -Regular Plan-Growth and Roshi Jain and Priya Ranjan toHDFC TaxSaver Growth.

Anupam Rasayan - Chemical company benefiting from China+1 factor

Anupam Rasayan is engaged in custom synthesis and manufacture of life science-related speciality chemicals in India. 

In Q2FY23, its operating revenue was Rs 31.07 crore, a YoY growth of 25%, while EBITDA was Rs 89.8 crore, a YoY growth of 29%. It also raised around Rs 500 crore through Qualified Institutional Placement (QIP) for growth capex in Q2FY23. Proceeds will be utilised for building multipurpose plants in existing units at Sachin and Jhagadia. A cash balance of Rs 192.1 crore in H1FY23 would be sufficient for the planned capex.

Fund managers who bought shares of Anupam Rasayan

Fund managers who added shares of Anupam Rasayan include Sanjeev Sharma and Vasav Sahgalfor Quant Active Fund Growth, Mahesh Patil and Dhaval Shah for Aditya Birla Sun Life Multi-Cap Fund Regular Growth, Satyabrata Mohanty for Aditya Birla Sun Life Equity Advantage Fund Growth, and Sandeep Manam and Akhil Kalluri for Franklin India Smaller Companies Fund Growth.

India is all set to go 5G as major telecom companies, including Jio and Bharti Airtel, have started the rollout. India's 5G entry was made official at the Indian Mobile Congress (IMC) event held in New Delhi on October 1. 

Reliance Jio picked Diwali to launch 5G, hinting that beta testing had launched on October 5. Bharti Airtel launched the service in eight Tier 1 cities on October 8. Vodafone Idea however, has not yet announced the date of its 5G launch or the cities where the service would be available.

5G will be the next big battle for domination among India's telecom companies. In the meantime, we take a look at their monthly subscription numbers over the past six months in this edition of chart of the week.

Reliance Jio’s active subscriptions took a hit in July but bounced back in August as it rose almost 1% to 38.5 crore. The data indicates that 91.8% of its total subscribers are active. The company had posted an average revenue per unit (ARPU) of Rs 176 in Q1FY23. 

Bharti Airtel’s active subscribers in August rose 0.5% to 35.8 crore. It has the highest proportion of active subscribers to total subscribers, 98.3%. The company’s average revenue per unit (ARPU) has also been the highest, at Rs 183.

Vodafone Idea on the other hand, has seen its active subscribers decline in the past six consecutive months and fell 1.4% to 21.4 crore in August. Only 84.8% of the company’s total subscribers are currently active. The company had posted an average revenue per unit of Rs 128 in Q1FY23.

According to ICICI Direct, the telecom sector is due to see a rise in ARPU in H2FY23. This rise will come on the back of a higher number of days and residual benefits of the tariff hike. 

Investors and traders are always on the hunt for alpha –  gaining excess returns on an investment relative to the benchmark index. But managing a portfolio that delivers this magic consistently, and over a period of time is something very few investors/traders are capable of. 

Why is this so difficult? A lot of factors come in the way of consistent alpha. A rising dollar may force foreign investors to temporarily exit the market, and cause indices to fall. Stocks in entire industries may fall as the sector struggles. Trading volumes may decline with changes in government regulations, or with a sharp economic downturn.

Investors also differ from traders, in seeking returns over a longer period, while investing in fewer stocks.  These investors don’t like bear market periods as a result, as even sound investments can see share price declines. Traders on the other hand, take advantage of both rising and falling markets to enter and exit positions over a shorter period, and take smaller and more frequent profits. 

Using DVM scores to deliver alpha on investments

Trendlyne’s durability (D), valuation (V), and momentum (M) scores allow investors to evaluate all aspects of a stock. By choosing from curated screeners or by creating your own, users can make use of these stock scores to devise a high-return trading or investing strategy. One can also backtest these screeners on Trendlyne to see how a particular strategy performed in the past. The backtests also have various filters that let you change the frequency of portfolio review, control for the number of stocks invested in each period, etc. 

There is no one-size-fits-all strategy in investing or trading. A Momentum Score strategy, which looks for stocks with bullish technicals, is more suitable for traders with an appetite for higher risk, who are very active in the stock market. While the Valuation Score strategy is suitable for value investors who are always looking for stocks that are undervalued, a Durability Score strategy which selects financially healthy companies, is for those looking for lower risk and in it for the long game.

Finally, combinations of these scores help investors identify high-quality stocks that may favor one approach over another. 

Let’s look at strategies that use these three DVM metrics individually, evaluate the results and then move on to combining these parameters in search of a better strategy. 

A Momentum Score strategy favours traders, but comes with caveats

This Momentum Score screener helps select high-momentum (technically bullish) stocks with sufficient volumes, so that it is easy for investors to enter and exit. This strategy outperformed all others as it delivered the highest CAGR over a shorter time frame (one to three years). This is optimal for short-term traders who are active in the stock market. Surprisingly, it also performed the best even in volatile markets, as it focuses only on stocks with the highest momentum score. With weekly portfolio reviews, this strategy delivered a stellar three-year CAGR of 301% against Nifty 50’s CAGR of 16%. 

The period analysis, which shows the returns every week, is also mostly in green. However, the maximum drawdown over longer investing time periods. 

Maximum drawdown is the biggest observed loss from a peak to a trough of a portfolio before a new peak is attained. This did not have a stop loss, so the drawdowns show the maximum possible with this strategy. 

Things to watch out for while employing this strategy: 

1. A weekly portfolio review is essential since the momentum score is sensitive to share price changes, and can cause higher stock entries and exits. A stop loss can also reduce negative return periods. 
2. Some stocks hit the upper/lower circuit as soon as the markets open–sometimes even before the market opens–in pre-market trading itself. Hence, in some cases, it can become difficult to enter/exit the stock when required. 
3. For longer term investors, other strategies are more optimal as weekly portfolio reviews may not be feasible for everyone. In those cases, valuation and other strategies perform better. 

A Valuation Score strategy delivers stellar long term returns, but has the highest drawdown

The Valuation Score trading strategy performs best in a longer time frame (10 years). This could be due to markets taking time to discover the stock’s true value and price it accordingly. The screener includes high valuation score stocks with sufficient volumes so that it is easy for investors to enter and exit.

Since the stock's Valuation Score changes with share price movement, it is necessary to review the portfolio every quarter. In fact, a quarterly review (as opposed to a yearly review) allows investors to select optimal stocks based on the screener and get maximum returns. In addition, limiting the number of stocks selected during each period keeps this number manageable (stocks can be limited under the ‘Advanced’ option in the screener - see image below)

Under these conditions, the strategy delivered a staggering 93.7% CAGR over 10 years. 

However, investors will have to endure a high drawdown when following this strategy. Another important thing to note is that a single stock could be responsible for a significant portion of the returns. 

In the top valuation score strategy for instance, Sunil HiTech Engineers (now delisted) delivered over 5,400% returns. So, missing a key stock could lead to lower-than-expected returns. In addition, not all low-valuation score stocks are undervalued stocks. There could be several reasons for low share price relative to earnings–litigations, distorted earnings due to one-time gains, etc. So, there is a chance that affordable stocks can plunge further in share price. In this strategy for example, Gitanjali Gems lost big as long-hidden fraud came into view –95% of its value. 

Good for low risk investors: With lower drawdowns, the Durability Score strategy delivers results when combined with other metrics

The Durability Score strategy is most effective in relatively short terms (three years) for investors, as it delivers higher returns during this period, compared to others. Like the other two strategies, a quarterly review of stocks and controlling the number of stocks to five shows high returns for investors.

Compared to other strategies which are heavily dependent on the share price, this has a relatively lower drawdown. This could be due to the presence of fundamentally strong companies in this screener. However, it becomes more effective when combined with other metrics like valuation score. 

One such strategy can be devised, by using a screener that lists high DVM-score stocks with tradable volume. Another option is to use one of Trendlyne’s expert screeners–DVM - High Return, Highly Durable Companies. This includes companies with high DVM scores with rising stock prices and strong fundamental growth. When this expert screener is used, returns increase significantly, compared to the high DVM strategy that only uses stock scores. 

This is particularly effective for a long term (10 years), with quarterly portfolio review, and controlled for five stocks. The top strategy in this category delivered 85.4% CAGR with a maximum drawdown of 53%. In addition, filtering for Nifty 500 stocks made marginal changes in the returns, but reduced drawdown. But filtering for Nifty 50 stocks led to underperformance, mainly because of the low number of stocks selected due to stringent parameters. 

Not surprisingly, period analysis is mostly in the green as the stocks selected here are fundamentally strong. 

The DVM expert screener performs the best, when accounting for drawdowns

When mid to long-term strategies across different categories are considered, high-valuation stocks deliver the highest returns. But when we consider the maximum drawdown along with the CAGR, the expert screener comes out ahead as it has a lower drawdown. 

The expert screener (DVM - High Return, Highly Durable Companies), delivered returns at a whopping 85% CAGR–meaning an investment of Rs 10,000 10 years ago is now worth over Rs 38.2 lakh. All an investor needed to do was to review the portfolio quarterly and shuffle it according to the entry and exit of stocks in the expert screener and stay invested. 

This is just the tip of the possibilities available to investors. Investors can use several different parameters such as PE ratio and ROE  to create screeners and backtest it to calculate the returns that particular strategy has delivered over a selected period. Combining these with Trendlyne’s stock scores can, as we saw above, substantially increase your alpha.

Investors can also choose several expert screeners encompassing different parameters and investment philosophies and backtest them to come up with a trading strategy that works for them.