Our 2024 equity outlook anticipated two distinct phases: strong frontloaded returns in H1, followed by a significant correction in H2. This correction, we believed, would stem from the gap between economic growth expectations and reality, reduced government capital expenditure, and pockets of valuation excess. While the data confirms our prediction of frontloaded returns, the anticipated deep correction didn’t materialize.
Though Q4 did see some downward movement, it proved more resilient than our initial forecasts suggested (we revisited our outlook in September 2024 as the scenario changed). The table below captures the quarter-wise movement of the key benchmark indices.
Our approach in 2024
In line with our expectations at the beginning of the year, we focused more on ‘profit booking’ in stocks that had bloated returns. We did this to take out profits before a correction and to leave money on the table for you, for deployment opportunities when a correction happens.
Up to September 2024, we had 5 calls on which we gave a ‘book profit’ and another 5 calls on which we gave a ‘Sell’. Simultaneously, we remained vigilant about emerging opportunities, identifying stocks and sectors with strong fundamentals that showed limited downside risk.
Our portfolio allocation shifted towards sectors with clear growth potential, including agriculture, consumption, healthcare, select financials and later IT and digital segments. Each recommendation was carefully evaluated based on growth prospects, earnings quality, and valuation metrics.
We maintained our traditionally prudent approach to stock selection, with heightened caution towards mid and small-cap segments that hadn't experienced significant corrections unlike their large-cap counterparts. Our recommendations this year focused primarily on companies with market cap above ₹15,000 crore, and averaging over ₹50,000 crore; reflecting our commitment to quality and risk management in an evolving market.
Performance of BUY calls in 2024
In this Prime Stocks performance review, let’s first summarise the BUY calls issued in 2024 and the average outperformance (or otherwise) of those calls. For this review, December 16, 2023, was taken as the cut off for the calendar year for measuring returns.
Please note that the returns (absolute) are from the date of each call and the index returns (Nifty 50) are for each call. The average of such returns is given in the table above.
Here are the key points:
- 12 in 17 calls (71% of the calls) outperformed the bellwether Nifty 50 index by 21.6 percentage points. The top calls include Affle India, Godrej Agrovet and two of our IPO calls in ‘buy’ – NTPC Green Energy and Swiggy. These stocks returned between 29-52 per cent from the respective date of their calls. Bluedart Express and Dr Lalpath Labs (given in end 2023) were also significant outperformers.
- Of the 5 underperformers, 2 of them – PVR Inox and RHI Magnesita – are less than 3 months old from our call. This is a very short period to measure real performance.
- The other 3 underperformers have seen a dip in their sector trend or have seen the narrative not play out as we expected; these include Motherson Sumi Wiring, Orient Electric and Aptus Housing. At this point, they are contrarian picks, but we will watch them closely for fundamental developments that could dent their potential and will take action as needed.
Our hits and misses
Before we get into the hits and misses list, we want to explain our stock classification and what stocks are considered for this exercise. As you may be aware, Prime Stocks has a list of stocks that are BUY, HOLD, SELL and more recently BOOK PROFIT.
There are a few things you need to know about these Prime Stocks calls.
- Many of you ask us whether you can buy a stock well after we issue the call. A stock that is on our Buy list will remain a buy even after the call is issued, as we believe that the upside potential is decent to enter even at price levels differing from our call.
- If a stock is moved to Hold, it implies that the upside may be limited for those who enter afresh but there is potential for growth for existing investors (who would already have seen some returns). Sometimes, we move a stock to a hold when some uncertainties crop up that warrants caution for fresh investments.
- Stocks that are a Sell move out of our active monitoring. A sell may be issued either if our thesis has entirely played out or our thesis is entirely proved wrong 😊
- A Book Profit call means that you continue to hold positions in the stock (considering its sound fundamentals) but after sweeping off profits that may have come by, oftentimes in a short span.
So, in the following Hits and Misses section, you will have calls issued in earlier years that are still a Buy or Hold (which means these are active calls) as well as book profit calls issued during 2024.
Hits
Consumer tech is in: The standout 'buy' recommendations given below span diverse sectors, highlighting multiple paths to strong performance. Agriculture, consumer technology, and financial services all produced winners. The consumer story is particularly interesting - rather than playing out through traditional channels, it's emerging in new forms. Take Swiggy, our IPO pick in the food delivery space or Affle India, which leverages digital marketing to reach consumers. These companies demonstrate how consumer-focused growth is evolving through technology and changing business models.
Long-term compounders: Needless to say, some of our earlier calls, be it the holding company behemoth Bajaj holdings or IRCTC or 2023’s calls such as Endurance and L&T Technology Services were all well-timed in terms of delivering returns quickly. However, when returns transpire sooner than expected, the upside would be capped, especially for new investors. We therefore prefer to keep such stocks in ‘hold’, allowing them to continue to generate wealth for those of you who hold it. Our call on HDFC Bank is another showcase of the merit in patience and attention to valuations and business strength. We had reiterated a Buy on this stock early in 2024 (our first call on the stock was in 2021); we had expected slow performance given the enormity of the merger but saw the valuation potential and as it eventually managed the merger.
As mentioned in the earlier section, other calls on Blue Dart Express and Dr Lal Path Labs also delivered handsomely, besides the IPO of NTPC Green Energy.
The table below showcases our calls with over 30 percentage point outperformance (no sanctity to the number 😊. We used it for a cut-off to restrict table).
Some of our other best performers during the year came from auto, financials, consumer durables and healthcare. Technology and financials started contributing towards the end of the year, though not much reflected in terms of the outperformance for 2024. Visit Prime Stocks to see the full list of our buy and hold calls.
We consciously started ‘book profits’ calls from end-2023, where we wanted you to lock into returns, especially when a sector’s big upcycle starts showing signs of slowdown or when a stock rises rapidly in a very short span of time. Towards this, we had called out a book profit on Bharat Forge and Tega Industries in 2023, believing that the auto and capex story may be slowing in 2024. We continued on this by issuing a book profit on Carborundum Universal as well.
Other candidates such as Glenmark Life Sciences, V Guard Industries also got similar treatment, with their outperformance margin head and shoulders above the index (see table below). As mentioned earlier, the idea behind a book profit is for you to realise gains and have the surplus to deploy into other opportunities.
Misses
Premature value hunt: Our bottom-fishing attempt in chemicals with Aarati Drugs didn’t work as expected and we eventually pulled out of the call. Price and volume volatility in the business became too severe to make reasonable forecasts on growth, return ratios and valuations. The company’s buy-back announcement allowed us to take some quick gains as well realising that it could not keep share price high sustainably.
Underwhelming sector pick: We found a similar challenge with the cement space, with our second recommendation in the sector, Nuvoco Vistas. We had anticipated a strong FY24 driven by multiple factors: government infrastructure spending, lower input costs, higher cement prices, and increased volumes. However, only the reduction in input costs materialized, while other expected catalysts failed to emerge. Given this underwhelming sector performance, we decided it was too risky to maintain multiple cement recommendations, particularly in a leveraged company like Nuvoco. This led to our decision to exit the position.
Hit by MFI headwinds: Despite Equitas Small Finance Bank's minimal exposure to microfinance, it faced fresh headwinds from the broader MFI sector crisis. While the bank delivered strong performance through FY23-24, leading us to maintain our 'hold' rating, we're carefully monitoring how these sector-wide challenges impact its financials. Given its relatively low MFI portfolio compared to peers, Equitas SFB is on a better footing than peers. We'll reassess our recommendation based on the bank's business performance and financial metrics over the next few quarters. The stock remains in our ‘hold’ list.
We also pulled out our recommendation on ABFRL and Honeywell Automation by issuing sell calls during the year as visibility on growth was not coming out clearly. Honeywell had the added complexity of limited information coming from its MNC parentage.
Other stocks such as Infosys, Galaxy Surfactants, Marico and the 3 banks we have a buy on, continue to remain have a strong fundamental business strength. Although some of these may not have beaten the index at this point, they continue to have the potential to be long-term compounders.
Curtains close on 2024
As we wrap up 2024, we're preparing our comprehensive market outlook for 2025, which we'll share in January. Regardless of market conditions, our commitment remains unwavering: identifying quality opportunities for long-term wealth creation. We encourage you to stay closely engaged with our stock updates to remain informed about meaningful market developments.
We close this year with deep gratitude for your continued trust and patience. In the ever-changing world of investments, patience is often rewarded handsomely - a principle we believe will hold true for our careful, research-based approach.
Here's to a prosperous 2025! May your investment journey be rewarding.
The above report is a performance summary of our calls. These are not advisory in nature. Please visit Prime Stocks to pick stocks that would suit your requirement and risk appetite.
Disclosures and Disclaimers
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (hereinafter referred to as the Regulations).
1. PrimeInvestor Financial Research Pvt Ltd is a SEBI-Registered Research Analyst having SEBI registration number INH200008653. PrimeInvestor Financial Research Pvt Ltd, the research entity, is engaged in providing research services and information on personal financial products. This Research Report (called Report) is prepared and distributed by PrimeInvestor Financial Research Pvt Ltd with brand name PrimeInvestor.
2. PrimeInvestor Financial Research Pvt Ltd, its partners, employees, directors or agents, do not have any material adverse disciplinary history as on the date of publication of this report.
3. PrimeInvestor Financial Research Pvt Ltd has not received any compensation from the subject companies in the past twelve months. PrimeInvestor Financial Research Pvt Ltd has not been engaged in market making activity for the subject companies.
4. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, PrimeInvestor Financial Research Pvt Ltd has not received compensation or other benefits from the subject companies of this research report or any other third-party in connection with this report.
