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

RBL Bank, Karur Vysya  Bank, MCX, Cyient and Mahanagar Gas were among mutual fund houses' top smallcap picks in October. While a few of such stocks have fallen off brokerage radar, following a steep rise in October, a few others could deliver healthy returns going ahead, data on average price targets suggests.

Shares of RBL Bank have jumped 5.7 per cent this month, in addition to a 18 per cent rise in October. Mutual funds upped holding in this private lender to 7.11 crore shares from 5.43 crore shares in September. These additional 1.68 crore shares that fund houses bought were worth Rs 227 crore, as per Nuvama Alternative & Quantitative Research.

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

This bank reported an in-line earnings in September quarter, led by lower provisions. Business trends were mixed, with a loan growth of 12 per cent YoY and 4 er cent QoQ. OPEX remains elevated as the bank continues to invest in newer areas of business and branch expansion. Following its Q2 results, HDFC Institutional Equities set a target of Rs 113 on the stock. ICICI Securities finds it worth Rs 125. Motilal Oswal has a target of Rs 160 on the stock.

Data showed, mutual funds' holding in Karur Vysya Bank increased to 19.22 crore shares from 17.60 crore shares, up 1.62 crore shares. The net shares bought were worth Rs 168 crore. This stock rallied nearly 28 per cent in October, but is down 1.7 per cent so far in November.  The average target price for this stock at Rs 106 suggests a 2.5 per cent upside potential.

Karur Vysya Bank has guided for sustained double-digit credit growth and over 3.8 per cent net interest margin (NIM) in FY23. ICICI Securities last month downgraded the stock, given the sharp run-up in the stock and lack of visibility over return on asset (RoA) reaching historical level of 1.5 per cent. HDFC Seucurties has a target price of Rs 114. The scrip closed at Rs 102.65 on Monday.

In MCX, mutual funds held 1.78 crore shares as of October-end compared with 1.68 crore in September. They bought a net additional 10 lakh MCX shares worth Rs 156 crore.  The scrip rose 26 per cent in October, only to fall 2 per cent in November so far. That said, the average target price for this stock at Rs 1,811 suggests a 20 per cent upside potential.

RateGain Travel, Anupam Rasayan, CSB Bank, Indiabulls Housing and Cyient are a few smallcaps that saw rise in mutual fund holdings in October. Among these stocks CSB Bank and Cyient are actively tracked by analysts. CSB Bank has an average target that suggests 43 per cent potential upside. Cyient's average target, as per Trendlyne, suggests a potentail up to 21 per cent upside. 

In case of RateGain Travel, MFs bought Rs 168 crore worth Rs 62 lakh shares in October. They held 1.39 crore  RateGain Travel shares as of October end from 77 lakh shares in September. This scrip rose 0.70 per cent in October and 1.8 per cent so far in November. Not many analysts track this stock.

MF held 20 lakh more Anupam Rasayan shares in October at 64 lakh compared with 43 lakh in September, valued at Rs 155 crore.  They bought Rs 70 crore worth of Indiabulls Housing stocks, Rs 56 crore worth of Cyient stocks and Rs 51 crore worth VST Tillers shares. Average target price for this stock at Rs 964.73 suggests a 20.52 per cent upside potential.

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

Mahanagar Gas' average target price suggests an 8 per cent potential upside.

Nuvama believes Mahanagar Gas can re-rate given its discounted valuation to long-term average amid healthy demand. It argues that CNG enjoys a strong moat vis-a-vis EVs and CNG remains more competitive than petrol and diesel. "We are constructive on Mahanagar Gas, owing to robust volume CAGR of 9 per cent over FY22-25E and pricing power enjoyed by CNG segment, which accounts 71 per cent its FY22 volume. MAHGL trades at 9.4 times FY25E EPS, 15 epr cent discount to last 3-year average," said Centrum  Broking, which has a buy rating on the stock.

Sharekhan has downgraded Intellect Design's raring to 'Hold'. "Continued deal wins and investment in platforms are long-term drivers, but margin pressure continues to persist given the macro headwinds. Hence, we downgrade Intellect Design to Hold with a revised price target of Rs. 560, given the near-term concerns on growth and margins," it said.  The scrip closed at Rs 443 on Monday. Centrum has a target of Rs 557 on the stock.

No price targets are available for other mentioned stocks.

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