The Preferred Small Ones

Eight months into the year and things aren’t any better than they were at the start, with the Indian stock markets, that is. The sob story continues. The Sensex shedding points during a day’s trade isn’t ‘breaking news’ anymore. While the 30-share BSE Sensex has been down by nearly 29 per cent (January 08, 2008 to August 08, 2008), it is the 488-share BSE Small-cap Index that has been burnt most severely, shedding nearly 48 per cent during the same period. When things turn bad, quite often those bringing up the bottom suffer the most. And quite naturally, fund managers have taken their hands off small-cap stocks through the decline as well. However, that’s not true for small-cap stocks, across the board. We mined the Value Research Portfolio Database to see if the fund managers bought any small-cap stocks during the year and we came out pleasantly surprised. In all, open-ended mutual funds added or bought fresh share of as many as 190 small-cap companies. Here is an insight into the prominent ten: Zee News Zee News, the news and regional entertainment network, was the funds’ top small-cap pick. The stock, after being split from Zee Entertainment Ltd, hit a peak of Rs 92.50 but has steadily slipped to Rs 44 now. 16 funds added the stock to their portfolios between January 2008 and July 2008, aggregating Rs 134 crore. At the end of July, 21 funds had exposure to Zee News. The company has been able to post some good returns for the quarter ended 30th June 2008, with a rise of 47 per cent in revenues taking them to Rs 110 crore and a nearly 50 per cent rise in operating profits amounting to Rs 15.2 crore. Ipca Laboratories Ipca Laboratories is a manufacturer of pharmaceutical formulations. The company gained attention of nine funds that amongst themselves bough share Rs 92 crore in the company between January and July. At the end of July, the number of funds holding Ipca Laboratories had doubled. The stock is down nearly 28 per cent from its peak in January and hurt by foreign exchange related losses, the company has reported a fall in net profits - that of 47 per cent for the June 2008 quarter over the corresponding quarter of the previous fiscal year. 3i Infotech 3i Infotech, a global provider of software products and IT services, has been a fancied pick of funds throughout the year. 16 funds have bought shares worth nearly Rs 65 crore in the company till July 2008. It appeared on the portfolio of 25 funds at the end of July. The stock went down 32 per cent from its peak in January to Rs 108 in July. However, the company has posted some robust numbers in the Quarter ended June 2008. Bajaj Electricals Bajaj Electricals has maintained buying interest in funds throughout the declining phase of the market. Six funds have together bought shares worth nearly Rs 62 crore in the company between January and July 2008. Nine funds held it on their portfolio at the end of July. The stock is down 42 per cent so far from its peak in January. The company reported a 75 per cent rise in net profit in the quarter ended March 2008 over the corresponding quart

This article was originally published on October 08, 2008.