IPL Portfolio: Smallcase manager Nitya Shah expects 2 themes to perform like Mayank Yadav

Water treatment and semiconductors are two themes that have earnings growth triggers and value, says Nitya Shah, smallcase Manager and Co-Founder of KamayaKya. “We have published recommendations on Ion Exchange Ltd and Va Tech Wabag Ltd and can attest to the phrase “Water is the new gold.” Also, pure water will be a beneficiary to the semiconductor theme,” he says. Edited excerpts:


An ideal mix for IPL team selection is an all-rounder, bowler, batsman as well as a great fielder all together. Considering the current scenario, Volatility in Market, expectation of correction, what would be the Ideal Portfolio Mix you would recommend to the investors.
Nitya Shah: At KamayaKya, we follow a stock specific approach and do not read too much into the volatility of the indices. We feel India is entering a golden age with drastic changes already visible, especially in the pace of execution. We have noticed that staying invested for long periods of time is where the real alpha returns are created. Stick to emerging trends, reasonable valuations, capable promoters and high growth. Taking this into account, we consider that a high allocation towards equity is prudent in the current market scenario for a long term horizon. As research analysts we cannot recommend portfolio allocations, but for my family’s personal portfolio, we are 90% invested in equities (50% large caps, rest in small and midcaps) and 10% in real estate and start-ups.

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As per the observations over the past years Chennai Super Kings & Mumbai Indians had been consistent performers whereas, Sunrisers Hyderabad and Kolkata Knight Riders have shown highly erratic performance. Similarly, what would you recommend to your investors? Should they invest in sectors/companies showing consistent performance or should they opt for the in high risk/ high return (highly volatile) company.
Nitya Shah: There are structural (consistent) businesses and cyclical (erratic) businesses. As per our thought process, it is sensible to invest in both of them to generate benchmark beating returns. Depending on risk appetite, investors can allocate towards cyclicals based on the following factors: bottom of the cycle margins which can turnaround due to higher capacity utilisation, ramp up in capex due to improved demand scenario, price to sales at 5 year lows, raw material cost reducing, commodity spreads and realisations on an uptick and strong balance sheets with low leverage which can withstand challenging situations.

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This IPL, Mayank Yadav has been highlighted as a discovery/ hero of the season. Likewise, would you suggest any emerging stock or sector for this year?
Nitya Shah: Two themes according to our team that have earnings growth triggers and value are water treatment and semiconductors. We have published recommendations on Ion Exchange Ltd and Va Tech Wabag Ltd and can attest to the phrase “Water is the new gold.” Also, pure water will be a beneficiary to the semiconductor theme.

Royal Challengers Bangalore, although have not won any IPL, their team always consists of Key Star performers. Considering portfolio creation, should investors only focus on the key asset classes or full mix of asset classes.
Nitya Shah: Each investor has a different risk profile and financial goal. According to us, invest your savings in a way which lets you sleep peacefully at night and is done in the direction of achieving the goal. Do what works for you.

Punjab Kings 11 has a very high potential to perform well in IPL, with a great mix of players in the team. When it comes to markets, do you feel there is any particular sector/s that has still not performed but has high potential or high growth opportunity in the coming times.
Nitya Shah: While most themes have played out lucratively in FY24, as per our analysis, we foresee a stronger performance in agrochemicals and chemicals in FY25. We like companies in the space with high market share, capex coming onstream, realisations recovering from lows, niche or moated products, low net debt and revenues largely coming from India. We have been reading that a strong monsoon season is approaching, which should benefit agrochemicals.

Generally, Mumbai Indians have been slow starter losing initial few matches, but often does greater comeback in the tournament at later stages. Do you see any similarities with a sector/ stock in stock market? Do you suggest retail investors to evaluate based on past performance and invest for long term horizon?
Nitya Shah: FMCG is a sector we can relate to. With rural consumption picking up once inflation cools down, a recovery in performance is imminent in FY25 end/ FY26.

The stock market is priced based on future expectations of earnings and cash flows, retail investors should invest based on earnings triggers over 2-3 years in the future. The past performance is factored in, use this to evaluate management quality to check if they walked the talk and to understand how they handled previous business cycles.

Dhoni is likely playing his last IPL season with a new captain Rituraj Gaikwad leading the team with his guidance. Dhoni and Gaikwad are acting as support systems and helping the CSK team perform well. Similarly is there any sector and adjacent sector that are both propelling each other forward that investors should keep a watch on?
Nitya Shah: As GDP rises, so will the demand for electrification. We feel that Artificial Intelligence and Data Centres will have huge requirements of electricity and energy. Therefore the Power and Energy sector coupled with the value chain of ancillaries including transformers, switchgears, cables and control panels should be kept a watch on.


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