Investor interest in small-cap focused mutual fund schemes is surging as large-cap schemes witness withdrawals. In the April-June quarter, these schemes saw a net investment of approximately Rs 11,000 crore. Analysts attribute this trend to the underperformance of large companies, prompting investors to seek better results from smaller companies.
Small-Cap Mutual Funds Gain Momentum as Large-Cap Schemes Experience Withdrawals
According to data from the Association of Mutual Funds in India (Amfi), large-cap mutual funds experienced an outflow of Rs 3360 crore in the June quarter. In contrast, small-cap funds received an infusion of Rs 6,932 crore in the preceding March quarter.
Underperformance of Large Companies Drives Investors towards Small-Cap Funds
Experts suggest that the rally in mid-cap and small-cap indices can be attributed to the challenges faced by the large-cap sector in delivering strong results. Consequently, investors are showing a preference for small-cap funds. The significant investment in these funds has made fund managers more cautious in stock selection due to elevated valuations. This phenomenon is common in the market as managers constantly seek stocks with favorable pricing.
Rising Infusion in Small-Cap Funds Reflects Investor Preference for Better Results and Higher Return Potential
Firoz Aziz, deputy CEO of Anand Rathi Wealth, highlights that investors are drawn to small-caps due to their similar risk appetite to mid-caps, coupled with higher return potential. Within the mutual fund space, small-cap funds have exhibited impressive returns, ranging from 30-37% in one year, 40-44% in three years, and 18-21% in five years.