Despite flat markets rally, 8 in 10 PMS approaches outperform Nifty in January

After markets rallied smartly in December, January turned out to be relatively flat for the indices. Inflation’s continued downward trajectory was positive for the markets. However, corporate results for the December quarter were mixed and hence markets were lukewarm.

In January, the average return from the 359 PMS approaches was 3.16%. This was much higher than the 0.02% that the bluechip Nifty 50 index managed during the month, while the broader market BSE 500 TRI delivered 1.92%.

FIIs were net sellers in January to the tune of Rs 35,978 crore. But DIIs continued their supportive role in the markets and they net bought Rs 26,744 crore in the cash market.

However, PMS investment approaches chartered a course of their own. As many as 289 PMS approaches (8 in 10) delivered more than the Nifty TRI in January. When compared with the BSE 500 TRI, just 202 schemes (or nearly 6 in 10) outperformed the index during the month.

The top performers’ list in the month was dominated by multi-cap strategies, with flexi caps being the next-best segment in January.

Top 10 PMS Approaches of January 2024

The following are the top 10 funds from the 359 PMS approaches tracked and analysed by PMS Bazaar.

The top 10 schemes recorded sterling performances in January with all recording double-digit returns. These funds gave 10-15 percentage points more than even the BSE 500 TRI during the month.

Coming first in the list of top performers in the month was Invasset’s Growth Pro Max fund with 17.14% returns. The fund invests in companies with free cash flows, those that can grow with a high return on capital employed, and have moats compared to competitors among a few other factors.

The ACE Midcap fund from Asit C Mehta Investment Intermediates came second with 16.93% returns in January. This strategy invests in growth companies that are available below their intrinsic values.

Coming third was the Growth fund from Molecule Ventures with 16.33% returns during the month. This scheme invests in a blend of secular, medium term and opportunistic themes in the market.

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, small-caps regained their lustre and were the best performers with the category delivering a healthy 5.01%. Thematic schemes came second with 4.33% returns in January. Small & midcap, large & midcap and multi-caps delivered reasonably well and each of these categories gave more than 3% returns during the month. Midcaps and large caps had a somewhat indifferent month with the categories falling behind others and giving 2.36% and 1.56%, respectively.

Overall, it was a robust month for PMS investment approaches across categories.

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

Small caps

January turned out to be a solid month for small-cap strategies and they were the best performers. During the month, the category gave 5.01% on average.

And the PMS funds with small-cap strategies did well, too. Of the 19 small-cap PMS approaches, 15 funds outperformed the BSE 500 TRI and as many as 18 gave higher returns than the Nifty 50 TRI in January.

The Growth fund of Molecule Ventures topped the list of funds in the category with 16.33% returns during the month.

Taking the second spot was the Special Situations Portfolio fund of O3 Securities with 11.07% returns in January. The fund looks to invest in businesses with improving prospects resulting in better operating parameters, but not yet fully reflected in the financial statements of those companies.

The Emerging Opportunities fund from Equitree Capital Advisors took third place with 7.99% returns in the month. This strategy invests in small and microcap stocks with a market capitalization of Rs 200 crore to Rs 5000 crore.

The performance of the category in January 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 3.47% returns on average during the month.

Taking the first place in the category was AlphaBets funds from QED Capital Advisors with 12.02% returns in January. This strategy follows a quant investment process for filtering stocks and ranks stocks on momentum and low volatility.

The second place was taken by Badjate Stock & Shares’ Aggressive fund with 11.08% returns during the month.

Grabbing the third spot was the Growth fund from Green Lantern Capital with a 9.53% return in January. This fund invests in companies that are industry leaders, have high RoE and trade with a high margin of safety.

Midcap

Midcap strategies had a reasonable month. The category gave 2.36% on average during January. Of the 23 strategies tracked, 15 funds managed to beat the Nifty 50 TRI, while 11 managed to outperform the BSE 500 TRI.

Asit C Mehta Investment Intermediates’ ACE Midcap fund came on top with 16.93% returns during January.

The Smart Beta Portfolio took the second spot during the month with a 6.09% return. This fund takes an algorithm-driven and rule-based stock selection approach.

Nippon India’s Emerging India strategy came third with 6% returns in January. The fund invests in high-growth emerging businesses that are existing or potential leaders in their operations.

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

Large and Midcap

This category was a reasonably robust performer during the month with 3.13% returns delivered on average by the 18 large and midcap funds delivered in January.

Motilal Oswal’s Multifactor Equity fund came on top with 10.71% returns during the month. The fund follows a quantitative model that incorporates factors such as quality, value, momentum and low volatility.

Samvitti Capital’s PMS Aggressive Growth took the second spot with 9.28% returns in January. The fund incorporates qualitative, quantitative and price-action factors in-stock selection.

True Beacon Investment Advisors’ Equity Factor Quant strategy came third with 6.95% in the month.

Large-cap

The Large-Cap category was the moderate performer in January. The 25 funds in the category delivered 1.56% on average during the month. As many as 17 funds outperformed the Nifty 50 TRI, and 12 beat the BSE 500 TRI.

Tulsian PMS came on top with a robust 6.64% return in the month. The fund invests in a portfolio of 10-15 stocks that are selected with a bottom-up approach.

Agreya Capital Advisors’ Momentum strategy came second with 6.34% returns during January. The fund invests in stocks that rank high on momentum. It follows a sector-agnostic and long-only approach.

Taking the third slot was Asit C Mehta Investment Intermediates’ ACE 15 strategy with 6.28% 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 January is depicted.

Multi-caps

The segment that has the highest number of funds gave 3.06% on average during January. Of the 168 strategies tracked, 134 (more than 8 in 10) outperformed the Nifty 50 TRI during the month and 96 did better than the BSE 500 TRI. Many funds in the category gave double-digit returns during the month.

Invasset’s Growth Pro Max fund was the first on the list with 17.14% returns in January.

Taking the next place was Bonanza’s Value fund with 14.12% returns during the month.

The third place was taken by the Dynamic Investment Portfolio of Systematix with 13.95% returns. This fund invests in companies with great management, good business models and where there is value mispricing.

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

Thematic

The thematic category gave a healthy performance in January and the category delivered an average of 4.33% returns. All the top three schemes gave double-digit returns.

Interestingly, the top three spots were taken by funds from the Green Portfolio stable.

The Dividend Yield strategy came first with an 11.9% return. The second and third places were grabbed by the Super 30 Dynamic and The Impact ESG funds, with 10.75% and 10.5% returns, respectively.

Summary & Outlook

Though the market was somewhat flat in January, active PMS approaches managed to deliver substantial alpha over standard benchmark indices.

As the results season for the December Quarter draws to a close, the earnings report card has been somewhat mixed. Software and FMCG companies have struggled, while banks, PSUs, infrastructure and real estate companies have reported sturdy numbers.

The interim Budget focused on fiscal discipline and increased capital expenditure and was generally welcomed by markets. Yields on g-secs continued to trend downwards as the government sought to keep a leash on borrowings and reduce the fiscal deficit over FY25.

From a macro perspective, inflation is under control, interest rates are stable and growth rates are healthy, signalling positivity.

However, as we head to the general elections over the next few months, the markets may remain choppy, especially in overheated spaces such as PSUs.