Investors need to understand that small-cap schemes are riskier than large- and mid-cap schemes and there can be intense volatility over a shorter timeframe. “Small-caps are domestic economy sensitive and given the ongoing crises, we have to give the economy some time to get on track,” says Subramaniam. He further explains that investors need to have a five-year outlook as valuations of small-caps have gone up. Sunil Subramaniam, managing director, Sundaram Mutual, says: “I am not saying that small-cap is overheated now but future expectations are already priced in.” The 17 funds that gave returns of more than 100 per cent have assets of approximately Rs 56,000 crore, shows the data from Value Research.īut with such huge returns, the mutual fund industry feels that investors having a long-term investment horizon should only enter at current levels. With assets of around Rs 71,700 crore, small-cap funds are among important categories in equity funds. Schemes, such as Nippon India Small Cap Fund and ICICI Prudential Smallcap Fund, have given returns of 119 per cent and 115 per cent, respectively, in one year. Strong returns generated by small-cap funds have attracted investors attention and in the past two months, small-cap schemes have seen net inflows.Īccording to the data from the Association of Mutual Funds in India (Amfi), small-cap funds had witnessed net inflows of Rs 336 crore and Rs 184 crore in March and April, respectively.Īlthough the amount might not be significant, it indicated a change in the trend.īefore that, in seven of the eight months, the category had seen outflows of about Rs 4,300 crore. In comparison, the BSE Sensex surged 55.2 per cent, and the BSE MidCap 81.8 per cent during this period.
The BSE SmallCap index gained 106 per cent in the one year ended May 12, 2021. In the past year, small-cap stocks have seen a tremendous surge largely due to the economic recovery, coupled with the gush of liquidity and expectations of an improvement in earnings in the years to come. The financial year 1989-90 was chosen as the base year because of the price stability exhibited during that year and due to its proximity to the current period."The inherent nature of small-caps is that they are too volatile and give better returns compared to large-caps and mid-caps over a longer duration.”
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