11 September 2020 – Bhartiy Niveshak

SEBI has come out with circular(SEBI/HO/IMD/DF3/CIR/P/2020/172) which mandates Multi Cap funds to put minimum of 25% funds in each Large, Mid & Small Cap. With size of ~1.5 Lakh Cr, that will result in 37K Cr of inflow to small and mid caps by January 2021. Small caps and Mid caps are ready to run crazy.

How does SEBI defines Large Cap, Mid Cap & Small Cap you may wonder.

List the all companies by Market Cap in descending order and take Top 100 companies they are large cap and next 150 (from 101-250) are mid caps and rest are small cap.

As per the June 30, 2020 AMFI Classification based on SEBI circular market cap of all Mid cap listed in India is 21.07 Lakh Cr and of Small cap is 14.09 Lakh Cr.

Remember funds won’t be interested in most of the small and mid caps. Select mid and small cap they will buy.

A massive buying spree is coming in next 5 months. If you are holding some good quality small cap and mid caps hold onto it much better days are coming your way. Please avoid buying into any and all kinds of small caps and mid caps because of such legal mandates.

This move by securities market regulator SEBI will also result in much wider buoyancy in stock market and that will result into high animal spirits. This will also result in easy and cheap funding for smaller companies which for last 3 years have been beaten down and are trading at ultra cheap valuations. This is win – win for all. Regulator having right mindset, focusing on growth of wider markets augurs well for all.

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Just like any other day, we were scanning through some charts amid the gloom and doom of the market, we spotted a stock making a stupendous move from entertainment industry mostly into owning IP of vast music library and film production. Stock was at its ATH. The name of the stock may sound like it is some tip, Tips Industries. On closer look at chart it looked like 19 years old level of 183 was broken yesterday(01 Sep, 2020) and it came to our radar on 02 Sep, 2020. The price was 215.

Have a look at this chart –

The stock was a buy on 22 June when it crossed its pre covid level at 134. Of course, we did not know back then if Tips was even listed. Again on 01 Sep when it broke out of 185 levels after the retest. 02 Sep was the perfect entry point as per our set up of ATH theme having strong fundamental stock story. That is when we put a broadcast message on this –

Now let’s see basics of the stock –

Investors who are obsessively focused on value which often tends to relate with buying more and more at the bottom will frown over such opportunity because stock has just become 4-5x in 1 year. Since we do not follow the dogma of value investing it does not trouble us.

Some data points –
1. 51 employees, founded in 1975 and run by Taurani family.
2. 25000+ songs in genre of bhajans to remix, 6M followers on Facebook, 1M followers on Twitter and 30M subscribers on YouTube.
3. Falling data rates, cheaper smartphones and wide gamut of streaming platforms and entertainment going digital augurs well for the company.
4. Company is planning to produce 2-3 films a year.
5. Paying subscribers for music in India are quite low(~1%) and they are expected to grow to 2-3% which will help the company.

Debt free, promoter holding 75%, 15%+ ROCE, revenue affected in near term due to less advertising spend because of Corona, last year Free Cash Flow of 29 Cr and company is trading with market cap of 360 Cr. Chart is suggesting good fundamental news will start flowing in.

Mentioned at 215 and in 8 days stock is now up by 28% in such a chaotic market and now trading at 276. One can always be wrong in the market, and in this stock that point is closing below 194.

Day: 11 September 2020

Effects of SEBI Circular on Asset Allocation of Multi Cap Funds 3.5 (4)

Why We Like This Music In Digitalization Age 5 (3)