With markets rising higher for the third successive month, the top performers’ list in August includes small & midcap, multicap, thematic, flexicap and multi asset strategies

The Nifty 50 touched a fresh high of 25,268 before ending +1.36% MoM at 25,236 in Aug’24. The index has closed higher for the third straight month now. Notably, the index was extremely volatile and swung around 1,375 points. The Nifty is up over 16% in CY24YTD. Notably, Midcaps underperformed largecaps in Aug'24, breaking the broader trend in calendar year 2024. 

In the PMS landscape, the month of August saw around 280 PMS approaches within the PMSBazaar universe beating the S&P BSE 500 TRI’s slim 0.96% return and around 230 PMS strategies outperform Nifty 50 TRI’s 1.36% up move. The return chart was led by Small  & Midcap PMSes with 2.32% category average gain, followed by Thematic (2.03%), Smallcap (1.87%), Flexicap (1.82%), Midcap (1.79%), and Multicap (1.68%). Largecap (1.27%) and Large & Midcap PMSes (0.64%) delivered uninspiring shows this month. Consequently, five out of seven PMS categories beat benchmarks, while Largecap and Large & Midcap categories trailed. 

Overall, 54% of the total 425 PMS approaches in the PMS Bazaar Universe outshined the Nifty 50 TRI and thus maintained the winning trend seen in previous months.  If you benchmark them with S&P BSE 500 TRI, which generated a lower return than Nifty 50 TRI in August 2024, then nearly 66% of PMS funds clocked alpha. This is markedly higher than about the 50% hit ratio in July.

The top-10 PMS performers’ list in August was well distributed amongst different categories. If you recall, July saw smallcap and midcap approaches dominate the list. Coming back to August, the 10 best PMS clubs are spread amongst 3 multicap, 2 small & midcap, 1 each from thematic, multi asset, midcap, flexicap, and smallcap funds. Market conditions, investor preferences, and fund manager expertise are likely to have influenced performance this month as returns on an overall scale shrunk.

Top 10 PMS Strategies of August 2024

While the category average returns across different product constructs remained within 3% in August, the top 10 schemes delivered strong performances compared to equity benchmark indices. In fact, the top 10 winning approaches clocked 8-12% returns this month, thus generating significant alpha over Nifty 50 TRI and S&P BSE 500 TRI. 

The 1.5-year-old Valcreate Investment Managers’ IME Digital Disruption thematic PMS strategy emerged as the number 1 in August, with the approach delivering a whopping 12.05% returns. This PMS strategy runs a concentrated portfolio investing exclusively in listed digitally-native platform businesses, with a private-equity approach to listed market investing. Notably in July, Valcreate had the honour of having a top-5 fund with its Lifesciences and Specialty Opportunities strategy.

The 2nd best overall performer in August was Pace Financial Investment Adviser’s Tresor SKG multi asset PMS strategy with a solid 10.06% gain. The around 1-year strategy follows a very aggressive investing methodology. Interestingly, Tresor SKG is one of the rare instances in recent PMS performance history where a multi asset strategy has found a top slot amongst equity peers. 

August’s 3rd best PMS strategy was Electrum Portfolio Managers’ Laureate Portfolio with a 9.55% return. The nearly 4-year-old small and midcap PMS approach focuses on investing in high-quality growth businesses at reasonable valuations.

The performance of the top 10 strategies and their comparison with Nifty 50 TRI for the month are given below.

Category-wise performance of PMS players

While June and July saw strong moves in the market, the market mood cooled down in August. Among sectors, Healthcare (+7%), Technology (+5%), Telecom (+2%), Consumer (+2%), and Financial (+1%) were the only gainers, whereas PSU Banks (-6%), Real Estate (-4%), Capital Goods (- 3%), Utilities (-2%), and Media (-2%) were the key laggards. 

The sectoral break-up is important to know because this likely affected various categories. Importantly, the performance gap between midcaps and smallcaps with large caps narrowed quite a bit in August. As a result, portfolios tilted towards relatively higher risk and did not reap higher rewards in August. 

From the PMS category perspective, Small  & Midcap PMSes were the best, followed by Thematic, Smallcap, Flexicap, Midcap, Multicap, Largecap and Large & Midcap approaches.

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

Small cap category 

August 2024 witnessed a different trend. Smallcaps stocks, in general, lacked the buoyancy seen in the last 1 year and thus the returns narrowed for the PMS category this month.  Though the smallcap PMS category continued to outshine the overall market, rising 1.87%, the alpha was smaller. Smallcap PMS investors would hope this was merely a blip in the overall long-term trend. 

Out of 24 PMS schemes tracked in this category, 16 outperformed S&P BSE 500 TRI (up 0.96%) and 15 outsmarted Nifty 50 TRI (up 1.36%). So, a majority of the approaches in the category gave more return than the markets.

The best-performing smallcap PMSes in August did generate robust returns. Right Horizons’ Super Value Aggressive PMS clocked 8.5% gains in August, earning its 1st rank. The approach runs a diversified portfolio of 25-35 companies and does investments in quality, growth-oriented businesses.

At number 2 was Equirus Wealth’s Long Horizon Fund with 6.11% while Jama Wealth’s Maxiom PMS – Spark was a close 3rd with 6.04% return in August. The Equirus strategy is renowned for its focus on businesses with high incremental return on capital, while Jama’s Maxiom SPARK approach swears by its ‘Roots & Wings philosophy’, targeting companies with low debt and consistent RoE/RoCE. 

Following are the top performers in small cap category:

Thematic category

In August, just like in July, thematic PMSes as a category secured the 2nd position among niches tracked by PMSBazaar. With an average return of 2.03%, the category with approaches focussing on digital, life sciences, lenders, MNCs, ESG etc. beat Nifty 50 TRI and S&P BSE 500 TRI easily. Out of the 17 thematic PMS offerings, 11 positive returns also beat the benchmark indices. Overall, the outperformance hit rate against Nifty 50 TRI was nearly 65%. 

Valcreate Investment Managers' IME Digital Disruption bagged the 1st spot with a whopping 12.05% return in August. This strategy was also the overall numero uno among the over 400 PMS strategies tracked.

In the second rank was InCred Asset Management’s Healthcare Portfolio with a 7.83% gain in August. This PMS approach, which had also secured 3rd rank in July, primarily targets the Indian healthcare sector with a focus on balancing risk and return. 

In the 3rd slot was Marcellus Investment Managers’ Kings of Capital strategy with a 3.06% return. This PMS approach aims to own a portfolio of 10 to 14 high-quality financial companies (banks, NBFCs, life insurers, general insurers, asset managers, brokers) that have good corporate governance, prudent capital allocation and high barriers to entry.

Top 3 PMS approaches: Thematic category

Small & Midcap category

The Small & Midcap PMS category with 37 tracked offerings generated an average return of 2.32% in August, comprehensively beating Nifty 50 TRI and S&P BSE 500 TRI gains. While the overall category gains were lower than 5%+ in July, the number of funds generating alpha in this category for August remained above its recent historical range. In total, 64% of schemes beat Nifty 50 TRI while over 75% outshined S&P BSE 500 TRI in August.  

Unlike the past few months, the Small & Midcap category in August had new poster boys. Electrum Portfolio Managers’ Laureate Portfolio (9.55%) and InCred Asset Management’s Small and Midcap (8.44%) PMS strategies secured number 1 and 2 slots. At 3rd rank was Ambit Investment Advisors’ TenX Portfolio with a decent 4.89% gain in August. 

While Electrum’s strategy focuses on investing in high quality growth businesses at reasonable valuations, InCred’s approach looks at stocks that can benefit from earnings growth and business re-rating through a bottom-up approach with a quality lens. Ambit’s TenX plays the earnings growth story in high quality companies in niche segments and with a highly differentiated product offering.

Following are the top performers in small and midcap category:

Flexicap category 

With as many as 58 PMSes in flexicap category, this is one of the biggest buckets in the portfolio management services landscape. The flexicap construct allows funds to dynamically adjust their allocation between large-cap, mid-cap, and small-cap stocks based on market conditions and investment opportunities. 

With a category average return of 1.82% in August, flexicap PMSes performed reasonably well. They also beat both the benchmarks. In total, 40 flexicap PMS funds beat S&P BSE 500 TRI while 32 outperformed Nifty 50 TRI. 

The top 3 flexicap PMS offerings are relatively new ones with  6-12 months of history. Wryght Research and Capital’s Alpha Fund emerged as the 1st in the flexicap category with 9.33% gain in August, thanks to its quantitative momentum approach that strategically selects a concentrated portfolio of 10 trending & high momentum stocks. 

At number 2 was Emkay Investment Managers’ Golden Decade of Growth offering with 6.1% gains. The PMS strategy bets on companies driven by major themes of growth like – Rising consumption, Digitalization/AI, Energy transition, Financialization of savings and the rising prowess of Indian manufacturing. 

Clockvine Capital Advisors’ Growth Fund was ranked 3rd with a 6.07% return this month. The strategy focuses on 4 pillars namely 1) growth, 2) long term sustainability of growth 3) good/clean and easy-to-understand balance sheets and cash flows, 4) businesses that can generate reasonable Return on Capital (>15% post-tax) on a normalised basis.

Midcap category

In August, the performance of 25 mid cap PMS approaches was relatively decent, resulting in an average return of 1.79%. While this number is lower than in June and July, midcap stocks trade at a significant valuation premium to largecaps and thus performance may reflect investor caution. 

With a majority of approaches demonstrating alpha-generating performances, 17 outperformed the S&P BSE 500 TRI benchmark while 12 outshined the Nifty 50 TRI benchmark.

Among the best midcap PMS performers in July are Wallfort PMS and Advisory Services' Ameya Fund (up 9.29%) and Diversified Fund (up 6.36%). Ameya is notably an absolute return strategy, while the Diversified Fund is more of a relative return one.  Sandwiched between the Wallfort offerings was Right Horizons’ Super Value strategy at the no. 2 rank with a 6.73% gain in August, helped by its basket of steady mid-cap equities that have favourable valuations

Following are the top performers in the midcap category: 

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

Multicap category

The largest space in the PMS universe, multicap strategies currently stand at 184 and thereby account for ~44% of the tracked offerings. This crucial segment posted an average 1.68% return in August, easily motoring past S&P BSE 500 TRI and Nifty 50 TRI. 

In essence, 133 of 184 schemes i.e. 72% beat Nifty 50 TRI (up 1.36%). Compared with S&P BSE 500 TRI (up 0.96%), the outperformance hit rate went up to 90%! 

The tilt towards mid cap and small cap stocks helps the cause of Multi Cap PMS category. The diversified nature of portfolio construction of Multicap PMSes means that during volatile times, large caps shield but during risk-on periods, the mid and small caps help lock in neat gains. 

With numerous schemes vying for the top spots, the competition for the top three positions is always fierce. The number 1 multi cap PMS offering in August was InCred Asset Management’s Multicap portfolio with a 9.4% gain in August. This strategy adopts a sector and market capitalisation agnostic approach to build a high-conviction portfolio of around 30 stocks. 

Closely following in the 2nd rank was Right Horizons’ Perennial strategy with an 8.85% gain in August. The PMS targets monopolistic and fast-growing capital-efficient franchises with reinvestment runways run by able and minority-friendly management, with a special eye on consumer, healthcare and technology plays.

Perennial was very closely followed by Stallion Asset’s Core Fund in 3rd slot with an 8.23% rise, which focuses on stocks that are proven monopolies and emerging monopolies in 4 areas: Consumer, Financials, Consumer Tech, and Pharma.

Below is a table highlighting the top performers of multi cap category:

Largecap category 

Given its sharper focus, the Large Cap PMS space is much more concentrated since they aim to play in a single market capitalisation band. Unlike June and July, August did not see the prevalence of risk-on sentiment. In sum, Largecap PMSes performed but many of them trailed the Nifty 50 TRI.

Posting a category return of 1.27% for Aug’24, the Largecap PMS universe on the whole did beat S&P BSE 500 TRI (0.96%) but outshining Nifty 50 TRI (1.36%) proved to be a tall order. Nevertheless, some Largecap PMSes out of the 26 tracked by PMSBazaar churned out notable performances. 12 approaches delivered alpha over Nifty while 16 outshined BSE 500.

In August 2024, Standard Chartered Securities India’s Long Term Value Compounder secured the numero uno spot among Large Cap PMSes with a performance of 4.57%. 

At the 2nd spot in the Largecap space was Ambit Investment Advisors’ Coffee Can with 4.23% return. The strategy runs a concentrated portfolio with low churn and selects companies with a proven track record of consistent growth and high RoCE.

Aditya Birla Sun Life AMC’s Top 200 Core Equity Portfolio with 3.03% gain in August took the third position. The strategy aims for sustainable growth over the long term in select industries and focuses on businesses that consistently create value. It uses quantitative screeners backed by fundamental research and relies on a value-investing approach.

The top 3 performers under this category are: 

Bottom line 

1QFY25 corporate earnings came in line, driven by domestic cyclicals. Healthcare, Real Estate, Capital Goods, and Metals sectors contributed significantly. OMCs negatively impacted earnings growth.

Over the long-term, the Indian market’s impressive returns have been driven by strong corporate earnings. While experts expect earnings growth to moderate, they retain a positive outlook. Large-caps appear more favoured over mid and smallcaps. PSU Banks, Consumption, Industrials, Real Estate, and Technology are key sectors to watch out for. 

Globally, the Federal Reserve's potential interest rate cut in September could be a significant boost for equity markets. Lower interest rates can stimulate economic growth by encouraging borrowing and spending. This could benefit various sectors, especially those sensitive to consumer demand.

Indian PMS investors increasingly have more reasons to be optimistic about India's potential. Strong growth prospects driven by a large and young population, a growing middle class, and government reforms are triggers, as India manages challenges such as infrastructure bottlenecks and economic uncertainties.