Five Indian Stocks Hedge Funds Love the Most

India has surpassed China as the fastest growing major economy across the entire world, after seeing its economy expand 7.3% in 2015. According to Delhi’s Central Statistics Office, the economy of the world’s second-most populous country was anticipated to reach a growth rate of 7.6% in 2016, higher than the 7.2% rate in 2014. Earlier this year, analysts at Goldman Sachs were recommending an Overweight position in Indian equities relative to those of other Asian counterparts, suggesting that strong consumption demand and government spending may support corporate profits.

That said, it might seem like a great idea to include some Indian equities in one’s equity portfolio, but how would one go about identifying stock winners in an unknown equity market? One could find possible winners by attending or closely following the upcoming inaugural Sohn India Investment Conference (register here), which will be held on June 3 in Mumbai, where attendees will have the chance to listen to market insights and investment ideas from top investors from India and around the world. Similar to the original Sohn Investment Conference in New York City, the Sohn India Conference raises money to support cutting-edge pediatric cancer care in India.

One can also find possible winners in the Indian equity market by looking at the most favored Indian stocks listed on U.S. exchanges, so this article will solely focus on five most-loved Indian stocks among the hedge funds tracked by Insider Monkey.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. Videocon d2h Ltd – ADR (NASDAQ:VDTH)

– Investors with long positions: 14

– Aggregate value of investors’ holdings: $136.33 Million

There were 14 hedge funds tracked by Insider Monkey with stakes in Videocon d2h Ltd – ADR (NASDAQ:VDTH) at the end of December, as compared to 19 recorded at the end of September. Videocon shareholders may not have been quite happy with the company’s stock performance since it became the first Indian media company to list on the NASDAQ in April 2016, but Videocon’s American Depositary Shares (ADSs) have gained an impressive 41% in the past three months. Even so, the ADS has declined by 22% in the past 12 months. Videocon d2h’s business operations involve providing direct-to-home services to subscribers, with the company being the fastest growing pay TV company in India. With a total number of 15 million subscribers as of the end of December, Videocon d2h appears to have more room to expand considering the potential pay TV subscriber market of at least 100 million subscribers. Jim Simons’ Renaissance Technologies LLC owns 188,100 ADSs of Videocon d2h Ltd – ADR (NASDAQ:VDTH) as of March 31.

#4. Tata Motors Limited (ADR) (NYSE:TTM)

– Investors with long positions: 15

– Aggregate value of investors’ holdings: $474.40 Million

The hedge fund sentiment towards Tata Motors Limited (ADR) (NYSE:TTM) declined in the fourth quarter of 2015, as the number of hedge funds from our system with stakes in the company dropped to 15 from 22 quarter-on-quarter. Despite that, the overall value of hedge fund stakes increased to $474.40 million from $431.03 million quarter-over-quarter. The largest automobile company in India, mostly known for the acquisition of Jaguar and Land Rover from Ford Motor Company (NYSE:F) in 2008, has seen its market value gain 30% in the past three months. Nonetheless, Tata Motors ADSs are down 2% year-to-date. It should be noted that the Jaguar Land Rover business accounts for more than four-fifths of the company’s total revenues. The entire company’s global wholesales in April, including Jaguar Land Rover, were 81,833 vehicles, an increase of 5% year-on-year. Meanwhile, global wholesales of all passenger vehicles in April reached 51,749 vehicles, up 1% year-on-year. Ken Fisher’s Fisher Asset Management was the owner of 8.79 million ADSs of Tata Motors Limited (ADR) (NYSE:TTM) at the end of March.

#3. Infosys Ltd ADR (NYSE:INFY)

– Investors with long positions: 21

– Aggregate value of investors’ holdings: $789.69 Million

Infosys Ltd ADR (NYSE:INFY) was the only stock within our list of five Indian stocks that received some love from the hedge fund industry during the final quarter of 2015. The number of smart money investors with stakes in the company increased to 21 from 19 during the fourth quarter. Infosys, India’s fourth-largest company by market capitalization, operates as a global consulting, technology and outsourcing services. The company recorded revenues of $9.50 billion for fiscal 2016 that ended March 31, up 9.1% in reported terms (an increase of 13.3% in constant currency terms). Moreover, the management of Infosys anticipates fiscal 2017 revenues to grow in the range of 11.5%-to-13.5% in constant currency. Infosys ADSs have gained 10% since the beginning of 2016. Bernard Horn’s Polaris Capital Management upped its stake in Infosys Ltd ADR (NYSE:INFY) by 5% during the March quarter to 6.29 million ADSs.

#2. ICICI Bank Ltd (ADR) (NYSE:IBN)

– Investors with long positions: 22

– Aggregate value of investors’ holdings: $390.39 Million

The smart money sentiment towards ICICI Bank Ltd (ADR) (NYSE:IBN) declined significantly during the final quarter of 2015, with the number of funds bullish on ICICI dropping to 22 from a much higher number of 34 quarter-on-quarter. ICICI Bank is one of the top private lenders in India and investors have been worried that the private-sector bank may have too many bad loans on its balance sheet. As a result, the bank has seen its market capitalization drop by a massive 35% in the past 52 weeks. Even so, the ADS of ICICI Bank has appreciated by 20% over the past three months. Just recently, the bank revealed that net non-performing assets were $2.0 billion at the end of March, up from $1.5 billion at the end of December. The increase in non-performing assets was said to reflect the sustained challenges in the operating and recovery environment, as well as the Reserve Bank of India’s objective of early and conservative recognition of stress and provisioning. Prem Watsa’s Fairfax Financial Holdings acquired a new stake of 1.50 million ADSs of ICICI Bank Ltd (ADR) (NYSE:IBN) during the first quarter of 2016.

#1. HDFC Bank Limited (ADR) (NYSE:HDB)

– Investors with long positions: 23

– Aggregate value of investors’ holdings: $1.42 Billion

HDFC Bank Limited (ADR) (NYSE:HDB) was the most popular Indian company listed on U.S. stock exchanges among the hedge funds monitored by Insider Monkey at the end of 2015. The number of hedge funds with stakes in HDFC Bank declined to 23 from 29 during the March quarter, whereas the overall value of those stakes increased to $1.42 billion from $1.33 billion quarter-on-quarter. HDFC Bank, the third-largest company by market cap in India, was one of the first private sector banks in India and has expanded at a high pace since commencing operations more than two decades ago. The bank added a number of 506 branches during fiscal 2016 that ended March 2016, with 256 of them being located in semi-urban and rural locations. HDFC has a network of 4,520 branches and 12,000 ATMs in 2,587 cities across the country as of March 31, as compared to 4,014 branches and 11,766 ATMs recorded at the end of March 2015. HDFC’s ADS is up 2% since the start of 2016. Richard Driehaus’ Driehaus Capital has 1.45 million ADSs in its equity portfolio at the end of March.

Disclosure: None