LIC made big money in these smallcap stocks; do you own any?

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Country’s biggest institutional investor Life Insurance Corporation of India (LIC) has managed to generate superlative returns from its equity investments despite upheavals in the market in the past one year.

Data available with Ace Equity showed that shares of smallcap player Standard Batteries have rallied 810% to 27.60 since February 17 last year. LIC held 20.89% stake in the company as of December 31.

Among the other stocks in the portfolio, Jaykay Enterprises, Gaira Bevel Gears, CG Power, Jaiprakash Associates, Digjam, Jet Airways (India), Garware Polyester, High Energy Batteries, Paisalo Digital and Wanbury have gained between 200%-517% in the past one year.

The last one year turned highly volatile due to Covid-19 pandemic. However, liquidity measures by the authorities and sustained inflows by foreign institutional investors (FII) took the benchmark equities to their record high levels.

Meanwhile, the BSE Sensex hit a 52-week low of 25,638.90 on March 24, 2020 and 52-week high of 52,516.76 on February 16, 2021.

Commenting on the current market momentum, Pankaj Pandey, Head – Research, ICICI Direct said, “We are the cusp of high double-digit earnings growth for Corporate India amid worst of the asset quality issues in the banking space behind us. Low-interest rate scenario is also conducive for equity investments.”

“We are positive on domestic equity markets with our December 2021 Nifty index target placed at 16,300 levels. In the current market scenario, the focus should be on businesses with are capital-efficient in nature or have well-defined path to attain sustainable capital efficiency,” Pandey added.

As much as 14 other stocks in LIC’s portfolio have also rallied between 100%-200% during the past one year. The list included players like Birla Tyres (up 172%), GTL Infra (up 152%), Reliance Communications (up 148%), Mukand (up 145%), Adani Transmission (up 139%), BASF India (up 138%) and Reliance Home Finance (up 135%).

Premier, The India Cements, Suzlon Energy, Fiberweb, Magma Fincorp, Hindustan Copper and Jaiprakash Power Ventures also jumped over 100%.

Hiren Ved, Director, CEO and CIO, Alchemy Capital Management believes that broader markets may outperform going ahead. “Midcaps and smallcaps are the most geared to an economic recovery. This is the reason why they have underperformed in the last 3-4 years as growth was missing. In fact, the markets had become extremely narrow and most investors were only looking at 10-20 companies which were delivering superior growth. We are in the midst of a broad-based earnings upgrade cycle driven by low interest rates, government push on capex, PLI outlays, China+1 FDI incentivising manufacturing, and improving capacity utilisation (which will lead to operating leverage). In such an environment, we expect broader markets to do well,” he said.