Nippon Asset Management- A High Probability TechnoValue Trade


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January 17, 2021


Strategic Alpha

     Asset Management Companies are Safer than banking and Insurance businesses. The reason for that is, In the Banking business, Banks take money from Depositors and lends out to their clients taking loans, However, the risk with this business model is, if many clients defaults around a similar period, it increases the risk for the bank and bank may enter into bankruptcy because of high NPA’s. That’s what happened with PMC Bank, Yes bank. The stock of Yes bank Fell from 300 to 5 Rs. In the Case of Insurance again they have to pay back the insurance amount to their clients in case of large claims and companies may go bankrupt. 

    However, the chances of that happening with Asset Management companies are very low.  Asset Management Companies’ business model is built in such a way that they charge 1.5-2.5% on the Assets they are managing. Once an investor invests 100Rs, AMC Charges the customers Annualised 1.5-2.5% on a daily basis which is adjusted in the fund NAV. AMC’s then have to manage all the expenses like Salaries, Marketing expenses Etc from that Expense ratio only. So lower the cost for an AMC, the higher the profitability. AMC’s which are having large assets under management with low-cost operations make the highest profits. Nippon Asset Management is one of the oldest AMC’s operating in India. It is the 6th Largest AMC in India In terms of AUM. I Like AMC Business over Banking and Insurance.

Nippon AMC is Debt Free with Cash and Cash Equivalents of around 376 Cr on its balance sheets. It’s a sunrise company in the sunrise industry. Mutual Fund Penetration in India is too low, Maybe less than 5%. I believe we are at that stage where the US was in the 1980s, the US has Mutual Fund Penetration close to 40% now. Mutual fund penetration over the next 10 years is expected to grow in double digits, with this it’s clearly evident that AMC business is into the sunrise industry. Read more about Nippon AMC here


 List of AMC’s In India According to their Size

How Asset Management Companies to work :

Technical Assessment :

    Nippon Asset Management has Created an Upflag Pattern Breakout. It has closed above its earlier resistance of 315-320 odd which was a major hurdle for this stock. Breakout has happened with volumes. With HDFC AMC Moving 25% in the past 2 Months, Nippon also can follow a similar path in the times to come.

 Nippon AMC CMP 332, Sl would be 310 on a weekly closing basis and the upside potential of this Upflag Pattern is around 410 odd.

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