While the mutual fund industry has seen sustained money flowing into equity schemes, one category that has grabbed the limelight in the last 6 months is smallcap.
Between midcap and smallcap funds, the latter has seen the highest inflows in 2023 to the tune of Rs 26,305 crore. On the contrary, largecap funds have seen net outflows of Rs 3,607 crore in the same period.
Thanks to the continued inflows, 24 smallcap schemes have given high double-digit returns so far in FY24, data analysed by ETMarkets showed.
A look at the performance of stocks that are part of these smallcap schemes showed that several stocks have more than doubled investors’ wealth. The S&P BSE Smallcap index has given a staggering 43% returns.Of the 610 stocks that are part of the smallcap schemes of mutual funds, 510 stocks have given atleast double-digit returns in FY24. In fact, 52 of these gave multibagger returns.
Mahindra Manulife Smallcap Fund: This fund topped the list of gainers, giving nearly 40% returns in absolute terms in FY24. Nine stocks – Suzlon Energy, REC, SJVN, Gujarat Mineral Development Corp, Engineers India, Kirloskar Brothers, Ujjivan Financial Services, Arvind, and Cholamandalam Financial Holdings – part of this fund, gave 101-204% returns since March.
Union Smallcap Fund: The second best performing smallcap fund has also given 40% returns in FY24. Three stocks – Gokaldas Exports, Syrma SGS Technology, and Electronics Mart India have given 110-119% returns in the last six months.
Nippon India Smallcap Fund: This smallcap fund has given 39% returns to its investors in six months, and 16 stocks that are part of this fund have given more than multibagger returns.
Texmaco Rail & Engineering, Genus Power Infrastructure, Mishra Dhatu Nigam, Gabriel India, Kaynes Technology, Pokarna, Inox Wind, Gokaldas Exports, Kirloskar Brothers, Apar Industries, and Zensar Technologies are among these.
Aditya Birla Sun Life Smallcap Fund: This smallcap fund of one of India’s top 10 asset management companies has given 38% returns since March.
Of the 106 stocks that are part of this fund, only 11 have either given no or negative returns, whereas seven stocks have turned multibaggers.
HDFC Smallcap Fund: This fund has given 34% returns to its investors in absolute terms in six months. Among the stocks the fund is invested in, eight of them have given multibagger returns in the said period. These are IFGL Refractories, DB Corp, Repco Home Finance, BEML, NRB Bearings, Vesuvius India, and Apar Industries.
Will the momentum continue?
Kotak Institutional Equities believes that the primary driver of the rally in smallcap stocks is the “irrational exuberance” among investors.
Infact, the brokerage is of the view that many of the new favourite smallcap stocks fall in the dubious category of ‘turnaround’ stories.
On the contrary, some money managers believe that the growing participation of investors in the market has somewhat diminished overcrowding in one particular segment.
“Although there could be cases of overvaluation in pockets in smallcap stocks, the phenomena of increasing market width could be seen as a sign of sustained deepening of the capital market in India,” said Kislay Upadhyay, smallcase manager and founder of FidelFolio Investments.
Given the way money is flowing into the smallcap category non-stop, money managers too, are left with no choice but to deploy them.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
