RBL Bank, Karur Vysya, MCX & CSB Bank: Are MFs’ top October smallcap picks worth a look?

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RBL Bank, Karur Vysya Bank, MCX, Cyient and Mahanagar Gas were among the top smallcap stocks of mutual fund companies in October. Some such stocks have fallen off the brokerage radar after a sharp rally in October, while some others may post healthy returns going forward, data from the average price target show.

Shares of RBL Bank have gained 5.7 per cent this month, apart from the 18 per cent gain in October. Mutual funds increased their holding in the private lender to 7.11 crore shares from 5.43 crore shares in September. According to Nuwama Alternative and Quantitative Research, these additional 1.68 crore shares bought by fund houses were worth Rs 227 crore.

An average target of Rs 130.75 on RBL Bank suggests a potential downside of 8 per cent for the stock.

The bank reported in-line earnings for the September quarter, led by lower provisions. Business trends were mixed with loan growth at 12 per cent YoY and 4 per cent QoQ. OpEx remains high as the bank continues to invest in new areas of business and branch expansion. Following its Q2 results, HDFC Institutional Equities has a target of Rs 113 on the stock. ICICI Securities got it for Rs 125. Motilal Oswal has a target of Rs 160 on the stock.

The mutual funds’ holding in Karur Vysya Bank rose by 1.62 crore shares from 17.60 crore shares to 19.22 crore shares, the data showed. The net shares bought were for Rs 168 crore. The stock had gained nearly 28 per cent in October, but is down 1.7 per cent so far in November. The average target price of Rs 106 for the stock suggests an upside potential of 2.5 per cent.

Karur Vysya Bank has guided for continued double digit loan growth and over 3.8 per cent net interest margin (NIM) in FY23. ICICI Securities had downgraded the stock last month, citing a sharp run-up in the stock and lack of visibility on return on assets (ROA) that hit a historic low of 1.5 per cent. HDFC Securities has a target price of Rs 114. The stock closed at Rs 102.65 on Monday.

The mutual fund held 1.78 crore shares in MCX at the end of October, as against 1.68 crore in September. He bought an additional 10 lakh MCX shares for Rs 156 crore. The stock rose 26 per cent in October, falling only 2 per cent so far in November. That said, the average target price of Rs 1,811 for this stock suggests 20 per cent upside potential.

Rategain Travel, Anupam Rasayan, CSB Bank, Indiabulls Housing and Cyient are some of the smallcaps whose mutual fund holdings saw an increase in October. These stocks are actively tracked by CSB Bank and Cyient Analysts. CSB Bank has an average target that suggests 43 percent potential upside. Cyient’s average target as per the trendline indicates an upside of 21 per cent.

In case of RateGain Travels, mutual funds bought shares worth Rs 168 crore worth Rs 62 lakh in October. He held 1.39 crore RateGain Travel shares at the end of October, up from 77 lakh shares in September. The stock gained 0.70 per cent in October and 1.8 per cent in November so far. Not many analysts are tracking this stock.

The MF placed 20 lakh more shares of Anupam Rasayan in October at 64 lakh, valued at Rs 155 crore, compared to 43 lakh in September. He bought Indiabulls Housing shares worth Rs 70 crore, Cyant shares worth Rs 56 crore and VST Tillers shares worth Rs 51 crore. The average target price of Rs 964.73 for the stock suggests an upside potential of 20.52 per cent.

Mahanagar Gas, Harsha Engineers, Religare Enterprises, Punjab Alkalies and Intellect Design were some of the other smallcap stocks that mutual funds bought for Rs 40-50 crore in October.

The average target price of Mahanagar Gas shows a potential growth of 8 per cent.

Nuvma believes Mahanagar Gas could be re-rated given its discounted valuations to long-term averages amid healthy demand. It argues that CNG enjoys a strong moat compared to EVs and CNG remains more competitive than petrol and diesel. “We are constructive on Mahanagar Gas, driven by a strong volume CAGR of 9 per cent over FY22-25E and the pricing power enjoyed by the CNG segment, which accounts for 71 per cent of FY22 volumes. MAHGL trades at 9.4 times FY25E EPS,15 epr per cent discount to last 3 year average,” said Centrum Broking, which has buy rating on the stock.

Sharekhan has put Intellect Design’s Raring on ‘Hold’. “Consistent deal wins and investments in platforms are long-term drivers, but margin pressure continues given macro headwinds. Hence, we downgrade Intellect Design to Hold with a revised price target of Rs 560, near-term Looking at the concerns of growth and margin,” it said. The stock had closed at Rs 443 on Monday. Centrum has a target price of Rs 557 on the stock.

There are no price targets available for the other mentioned stocks.

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