December continued to be a solid month for the equity markets. The indices were strong and continued on after a spectacular November. Expectations of rate cuts later in the year from Central Banks around the world as inflation comes under firm control was a key contributor, as was the positive verdict in the State elections.

In December, the blue-chip Nifty 50 index gave 7.94% return in the month, while the broader market BSE 500 TRI recorded a stronger 8.04%. Both FIIs and DII continued their buying spree. While FIIs made net purchases of Rs 31,960 crore in the equity cash markets, DIIs net bought to the tune of over Rs 12,942 crore.

When it comes to Portfolio Management Services (PMS) 352 out of 360 PMS Investment Approaches recorded positive returns, with an average return of 5.01%. The top performers’ list in the month was dominated by large cap strategies, with flexi caps being the next best segment. Small and midcaps were conspicuous by their absence in the topper’s chart in December.

Top 10 PMS Strategies of December 2023

The following are the top 10 funds from the 360 PMS Investment Approaches tracked and analysed by PMS Bazaar.

The top 10 schemes recorded considerable outperformance in December. These funds gave 3-5 percentage points more than the Nifty during the month. 

At the top of the list was Carnelian Asset Advisors’ YNG strategy with 12.93% returns during the month. The fund invests in companies offering a combination of earnings growth due to a favourable business cycle and dividend/FCF yield, which provide margin of safety on valuations and hedge against inflation.

Coming second was the ACE Multicap fund of Asit C Mehta Investment Intermediates with 12.5% returns in December. This PMS invests in 25 equal-weighted stocks that are undervalued.

The third in the chart was Tulsian PMS with 11.7% returns in the month. It is a large cap fund which invests in 10-15 growth stocks selected on a bottom-up approach.

The performance of the top 10 strategies and their comparison with Nifty and BSE 500 for the month are given below.

Category-wise performance of PMS players

During the month, the average return was in a wide range across categories. Small caps were the worst performers in December with just 2.81% returns. Large caps and large & midcaps were the best categories with 7.09% and 7.04% returns in the month. Multicaps were a distant third with 5.21% returns. Midcaps with 4.69% and thematic strategies with 4.62% were the next in the list. Small & midcaps gave 3.64% returns during the month. 

The performance of the strategies is depicted below in the chart.

Small caps

The month of December turned out to be damp for small cap funds. During the month, the category gave 2.81% on an average.

Equitree Capital Advisors’ Emerging Opportunities Investment Approach, which is small & micro cap focused, invests in under-researched and under-invested companies, and takes contrarian calls, took the top spot in December with 7.91% returns.

Taking the second spot was the Special Situations Portfolio of O3 Securities with 5.66% returns during the month.

The third spot was grabbed by the Little Champs Investment Approach of Marcellus with 5.64% returns.

The performance of the category in December with respect to the BSE 500 TRI and Nifty 50 TRI is depicted in the graph below.

Small & Midcaps

The small and midcaps segment gave a modest 3.64% returns on an average during the month. 

The Small & Midcap Investment Approach of Kotak took the top slot in December with 6.97% returns. This fund would invest in 10-25 small and midcap stocks, with the flexibility to invest up to 25% of the portfolio in large caps as well.

Vallum India Discovery Investment Approach too the second place with 6.82% returns in the month.

Coming third was the Midcap PMS Fund of Atlas Integrated Finance with 6.1% returns delivered in December.

Midcap

Midcap strategies had a lukewarm run in December. The category gave 4.69% on an average during the month. 

Asit C Mehta Investment Intermediates’ ACE Midcap Investment Approach came on top with 9.36% returns during December. 

Master Trust India Growth Strategy came second with 7.53% returns in the month. The fund invests in growth companies available at reasonable prices.

Nippon India’s Emerging India Investment Approach came third with 7.43% returns in December. The fund invests in high-growth emerging businesses are existing or potential leaders in their operations.

The chart below shows how the midcap PMSes fared against the Nifty 50 TRI and BSE 500 TRI in December.

Large and Midcap

This category was reasonably robust performer during the month. The 18 large and midcap Investment Approaches monitored by PMS Bazaar delivered 7.04% on an average in December.

The Large & Midcap Strategy of Care Portfolio Managers cam on top with 11.5% returns during the month. This fund invests in 18-20 companies from the top 250 firms by market capitalization that have sustainable business models across cycles.

Torus Oro Portfolio Management’s All Weather Portfolio took the next place in the performance list with 8.91% returns in the month.

True Beacon Investment Advisors’ Equity Factor Quant Investment Approach came s close third with 8.72% in December. 

Large cap

The Large Cap category was the top performer in December at an overall level. The 25 funds in the category delivered 7.09% on an average during the month. The top five performers gave double-digit returns in December.

Tulsian PMS came on top with a robust 11.7% returns in the month. The fund invests in a portfolio of 10-15 stocks that are selected with a bottom-up approach.

ICICI Prudential AMC’s Large Cap Strategy was the second in the performance chart with 10.51% returns in the month.

Taking the third slot was Asit C Mehta Investment Intermediates’ ACE 15 Investment Approach with 10.42% returns.

In the chart below, the performance of the large-cap category average against the returns of the Nifty 50 TRI and BSE 500 TRI in December is depicted.

Multi-caps

The segment that has the highest number of funds gave 5.21% on an average during December. 

Carnelian Asset Advisors’ YNG Strategy came on top with 12.93% returns during the month. This PMS Investment Approach is focused on delivering a blend of growth and dividend yield.

The Long Alpha Investment Approach of Estee Advisors came second with 9.81% returns in December. This fund uses technical and fundamental factors to build its portfolio.

Bonanza’s Value Investment Approach came a close third with 9.4% returns during the month.

In the chart below, the performance of the multicap category average against the returns of the Nifty 50 TRI and BSE 500 TRI in December is depicted.

Thematic 

The thematic category gave a moderate performance in December with 4.62% returns. 

Invesco’s Dawn Investment Approach was the best performer in the category with 8.29% returns in the month. This fund invests in stocks and sectors that are expected to benefit from a cyclical recovery.

Green Portfolio’s Impact ESG Fund came second with 7.07% return in December.

Invesco’s Rise Investment Approach took the third spot with 6.65% returns in the month. This fund looks to invest in stocks that may benefit from economic growth and rise in consumer discretionary spending.

Outlook:

December continued to be a great month for the markets, continuing from November’s momentum. Large caps came back in favour after a period of underperformance and mid and small caps somewhat receded to the background due to the stupendous run they had earlier. PSU stocks have been quite the flavour and positive political outcomes added zing to the market rally.

The Federal Reserve has now started speaking about multiple rate cuts later in the year, which is an added tailwind for global markets. Inflation, crude oil prices and geopolitical tensions, all seem under control for the moment.

As the results season unfolds in January, financials of companies and earnings growth would be back in focus and would provide clues on whether the market euphoria would continue. Valuations and corporate earnings would be keenly monitored to ensure that there are no bubbles building up in any market segment.