Porinju Veliyath made his comeback in FY21, but his PMS still lost clients

MUMBAI: The dream run in the domestic midcap and smallcap stocks over the past 12 months would have led keen observers of India’s stock market to assume that Porinju Veliyath, one of the country’s most eccentric value investors, will make a major comeback in the investment scene.

Since hitting their multi-year lows in March 2020, midcap and smallcap stocks have made a roaring comeback, as is reflected in the over 100 per cent gains in the Nifty Midcap 100 and Nifty Smallcap 100 indices for the past 12 months.

In the same period, Veliyath has seen the asset under management of his PMS more than double to Rs 1,182 crore, latest data available on the Sebi website showed.


The stellar returns in his portfolio, however, were not enough to win back clients that the fund lost during its lean year. Equity Intelligence lost another 224 clients in the financial year ended March 2021, after 236 clients exited the fund in 2019-20, data on the Sebi website showed.

Veliyath made a name for himself during the smallcap and midcap boom of 2016-2018, as asset under management of his portfolio management service quadrupled to Rs 1,574 crore and the client base almost tripled.

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Yet, the subsequent two years were ‘humbling’ in the fund manager’s own words. “The last selloff was indeed a humbling one, and I believe I have emerged out of it a bit wiser. My optimism about promoters turning around and systems changing has certainly sobered down,” Veliyath told ETMarkets.com in his first-ever interview following a self-imposed media blackout over the past few years.

In the bear market in midcap and smallcap stocks that started in early 2018, Veliyath’s portfolio management service saw its assets under management decline nearly 75 per cent, while he also lost some of his clients.

Investors in Veliyath’s PMS did not ditch his investment style the moment the returns started to dwindle. In fact, when the PMS’ asset under management tanked 25 per cent in 2018-19, the fund added nearly 270 new clients.

At that time, Veliyath accepted the sharp drop in his fund’s performance, but continued to predict that the initial fall in midcap and smallcap stocks was the right time to plunge in.

“After this big fall, I think this is the most exciting time when I look back in the last five years. Now is the time to really look at and load up on select midcaps and smallcaps,” Veliyath told CNBC-TV18 in an interview in mid-2018.

That prediction fell flat as midcap and smallcap stocks continued to plumb lower in the next year before it culminated in the capitulation in the Covid-led crash of March 2020.

Despite the adversity faced over the past three years, Veliyath has not lost his sense of optimism for the Indian economy or the broad market. In his February interview to ETMarkets.com, the maverick value investor blew the bugle on India’s growth trajectory and return potential of value investing.

Veliyath will hope the performance of his PMS over the past 12 months is a lead indicator for a possible return of the good times going forward.