Foreign investment and broking group, CLSA Group has upgraded the stocks of Nippon AMC and HDFC AMC to a "buy".
The asset-management industry has had strong tailwinds in FY22: CLSA
According to CLSA, growth is likely to beat expectations, helped by growing systematic investment plan (SIP) flows and strong market returns.
"The industry remains under penetrated in India, with an attractive long-term story on financial savings. For covered Asset Management Companies (AMCs), CY21 equity scheme investment performance has improved significantly in the past two years," the brokerage has added.
CLSA notes that HDFC Asset Management, continues to lose share while Nippon Life India AssetManagement's is stabilising.
"Regulatory headwinds in the past three-plus years have compressed equity yields but with strong growth in FY22, some future pressure is now in the base, more so for Nippon, in our view. Our FY22-24 Nippon earnings growth outlook, therefore, has improved materially vs early FY22estimates. We cut HDFC AMC's target price from Rs 3,100 to Rs 3,000 with earnings cut and lower multiple. We upgrade HDFC AMC and Nippon from O-PFto BUY on favourable risk/reward after 17-20% corrections in last three months," the brokerage has said.
Improvement in performance
According to CLSA, HDFC AMC and Nippon Life AMC have posted significant improvements in investment performance during 2021 across almost all equity and hybrid fund categories; this should aid market share performance with a lag, in our view.
"Our past analysis suggests equity AUMs share performance correlates with schemes'investment performance. On the debt AUM side, bank-backed AMCs have gained share over the years," CLSA has observed.
The above two stocks are picked from a report by CLSA. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. Investing in stocks is risky. Invest only if you have an appetite for risk. The author and his family do not own shares in the above companies.