Uncovering Hidden Gems: The Quantace Startup India Unicorns Investment Basket

The Startup ecosystem in India is booming. With over 100 Indian Startups being valued at over $1 billion, the opportunities for investors to tap into this growth are endless. However, with so many options to choose from, it can be difficult to know where to start. That’s where the Quantace Startup India Unicorns investment basket comes in.

At Quantace Research, we set out to innovate in the often-dull investment industry. We asked ourselves, why can’t we identify listed companies that show characteristics of growth, yet have a market cap of less than $1 billion? We discovered that micro-cap stock research is often overlooked in India by large houses, and so the potential for spotting awesome stocks is higher.

We delved into macroeconomic trends, open-source macro data, and alternative data to build relationships between price and other factors. This allowed us to create a unique quantitative model that explains the price relationships. Our proprietary algorithm is a black box model, so we do not wish to disclose the exact methodology and quantitative models we use to identify such companies.

One of the major shots in the arm for our basket came in 2022, when the Indian Startup economy added its 100th unicorn. We realized that even public market participants should be able to participate in the startup like growth, and thus decided to focus on listed companies with a market cap of less than $1 billion.

So, how does the Startup India investment basket differ from other stock investment options available on the market? 

For one, we focus exclusively on listed companies with a market cap of less than $1 billion that show characteristics of growth. This is a unique proposition in the investment industry. Additionally, our basket is more suitable for retail investors as it offers more liquidity and a smaller ticket size than private placement investing.

But what kind of returns can investors expect? 

The results speak for themselves. In the last year, the basket has returned 48% compared to the small-cap index returns of -14%. We’ve created an alpha of 62%, and we’re currently ranked #2 in terms of overall returns on Smallcase in the 1-year time frame. In the last 6 months, the basket has returned 55% compared to the small-cap index returns of 3%. We’ve created an alpha of 52%, and we’re currently ranked #1 in terms of overall returns on Smallcase in the 6-year time frame. We are expecting an overall CAGR of 30-32% in the long run.

Investing in startups through the Startup India investment basket also aligns with the overall value creation offered by startup ecosystem in India. By investing in publicly listed companies, investors have the added benefits of liquidity and data disclosures. As a quant manager, we take advantage of these data disclosures and build mathematical relationships with price and macro trends, macro data, and other alternative data.

But who is best suited for the high-risk opportunities presented by the Startup India investment basket? 

This kind of investing is suitable for high-risk takers who have the ability to stomach the volatility shown by such stocks. We recommend that investors have a minimum investment horizon of 1 year to see optimal results and ROI for their investments.

In terms of investment amount, we recommend investing between 5-15 Lakhs. 

And for a sneak peek into our basket

One stock we currently have in our basket is Kirloskar Ferrous Industries Ltd. This stock has given 69% returns in the 1-year time frame and 75% in the 6-month time frame. Its annualized risk is approximately 46% and has an attractive reward to risk ratio as per our scoring models. It is a bullish metal play name.

The Quantace Startup India Unicorns investment Basket offers investors a unique opportunity to tap into the growth of the Indian startup like ecosystem. By focusing on listed companies with a market cap of less than $1 billion, we’re uncovering hidden gems that others may have missed. We’re able to tap into the growth potential of startups while also providing liquidity and a smaller ticket size for retail investors. In terms of returns, our basket has consistently outpaced the small-cap index, with returns of 48% in the last year and 55% in the last 6 months.

So, how can potential investors get started with subscribing to the Quantace Startup India Unicorns investment basket? 

Quantace Portfolios are exclusively available on smallcase.

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Quantace Chetak Momentum(Aggressive) Factor smallcase by Quantace Research