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Up to 200% returns! MFs raised stakes in 10 stocks for 8 quarters in a row

There are 10 small and micap stocks where mutual funds raised their stakes.

Updated: Mar 05, 2018, 01.38 PM IST
There are 10 small and micap stocks where mutual funds raised their stakes.
NEW DELHI: Strong flows into mutual funds (MFs) have been among the key reasons why the domestic market has stood tall over the last two years. The flows have not only countered foreign outflows in challenging times, but have also lifted many midcap and smallcap stocks during the period.

There are at least 10 small and midcap stocks where mutual funds raised their stakes in eight consecutive quarters now, data compiled from database Capitaline showed. The stocks have risen up to 200 per cent during the said period .

Among them is Tata Chemicals, which turned 179 on March 3. Mutual funds held 24.58 per cent stake in this Tata group firm as of December 31, 2017 from 11.27 per cent at the end of December quarter of 2015. Domestic funds have incrementally raised their stake in this firm in last eight quarters.

The company has come out with several initiatives of late, especially towards deleveraging its balancesheet, and is now focusing on operating efficiency and profitability.

In a recent concall, the management said, "The balancesheet has been deleveraged. We have got a healthy working capital level now. We are clearly focused on continuing our leadership in industrial chemicals or bulk chemicals as we call it, which is mainly soda ash. We are growing our consumer and specialty businesses. We are extremely confident that both these businesses over a period of time will meet the target i.e. to be at least 50 per cent of the revenue of the company."

This stock is up 102 per cent over the last two years.

India Cements is another stock that has seen MFs' strong backing for two years now. From 6.49 per cent at the end of 2015, MFs owned 20.77 per cent stake in this cement maker at 2017-end.

Edelweiss Securities has maintained a positive view on India Cements as it sees an improvement in sand availability in Tamil Nadu (TN) and benefits of demand and cement price recovery in other key markets of southern and western regions. "We introduce FY20E Ebitda with 12 per cent YoY growth. With the management’s focus on deleveraging intact, we continue to value India Cements at 9 times EV/Ebitda and rolling over valuations to FY20E," the brokerage stated.

This stock rallied 112 per cent in the past two years.

Data showed that mutual funds infused over Rs 1,70,000 crore in equities in March 2016-February 2018. These funds have been net buyers for 19 months now.

Carborundum Universal, a Murugappa Group stock, rallied 98 per cent during the last two years. MF holding in the stock has gone up to 19 per cent in 2017, from 11.2 per cent in 2015. Analysts expect this company to maintain its revenue mix for now -- with abrasive division contributing nearly 40 per cent, industrial ceramics 25 per cent and electro minerals 30 per cent of the revenue pie. They see share of high margin products such as metalised cylinder to increase within each product category though.

From 6.41 per cent stake in 2015 to 14.46 per cent stake now, MFs have been ramping up bets on Oriental Carbon Chemicals. Centrum Broking has been positive on this company’s prospects because of solid demand outlook for insoluble sulfur (IS) in the domestic market and opportunity of gaining market share in new geographies of the US and China.

"Consolidated margins are expected to improve materially over FY17-19E led by benefits of operating leverage and turnaround of its downsized subsidiary, Duncan Engineering. After two quarters of neutral stance, we upgrade our rating as this stock has seen time correction and earnings visibility has improved in the interim," Centrum Broking said. The stock's rally over the last two years stood at 193 per cent.

JK Cements (up 86 per cent) and Deccan Cements (up 100 per cent) are two cement makers that have seen MF buying pick up in the eight quarters gone by. Cigarette manufacturers VST Industries (up 92 per cent), chemicals, textiles and consumer products maker GHCL (up 166 per cent), white goods maker Symphony (51 per cent) and media firm Entertainment Network (13 per cent) are some other companies that saw persistent MF buying in the previous two years.

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