Small-cap funds shine amidst ongoing stock market rally
Small-cap funds registered record high monthly inflows of nearly Rs 5,472 crore in June, as per data from the Association of Mutual Funds in India (AMFI); most equity categories witnessed outflows
- Jul 10, 2023,
- Updated Jul 10, 2023 2:00 PM IST
Investors putting money into the stock markets through the mutual fund route seem to be betting big on small-cap stocks as funds focused on this segment registered an all-time high monthly inflow of Rs 5,472 crore even as some other categories of equity funds witnessed net outflows in June.
According to data from Association of Mutual Funds in India (AMFI), small-cap funds registered the highest net inflows among all categories of equity funds in June and even bettered last month’s inflows of Rs 3,282.50 crore, which was a multi-month high.
Interestingly, the record flows came even as popular equity categories like large-cap and flexi-cap funds, equity linked savings schemes (ELSS) and focused funds all witnessed net outflows in June.
Even among those that saw net inflows–mid-cap, multi-cap, and large & mid-cap funds—the quantum of flows was much lesser than that of small-cap funds.
Experts attribute the trend to the correction witnessed in the small-cap universe and their potential to grow from the current levels amidst the overall stock market rally that saw the benchmark Sensex touch a new all-time record high of 65,898.98 intraday on July 7.
“Essentially, there is a rotation of stocks happening as people are withdrawing from large-cap funds and putting in small-cap schemes because they feel there is potential to make more gains in small caps. They believe that small cap equity valuations are very low due to correction and hence small-cap funds are seeing traction,” said N S Venkatesh, CEO, AMFI during his interaction with the media on Monday.
Further, when asked if investors are getting into riskier assets by moving towards small-cap stocks, he said that mutual fund schemes come with a lot of transparency and disclosures including a risk-o-meter and so investors are coming in fully understanding the risks.
“It depends on each one’s risk appetite… I think investors are coming in fully understanding the risks as there is a lot of transparency and disclosures by mutual funds including a risk-o-meter. Further, small-caps have corrected by more than 60 per cent so now they believe that this is the time that small-caps will start growing and there is potential for gains. On the corporate side as well, the earnings are going up irrespective of whether the company is a large-cap or a small-cap,” said Venkatesh.
Interestingly, index funds—that mirror benchmark indices like Sensex and Nifty among few other key indices—saw a marginal outflow of Rs 906 crore in June even as the benchmarks are currently hovering around record levels.
“Outflow in index funds was seen after a long time and it has been only marginal. Some profit booking could have happened as indices are at all-time high levels,” said Venkatesh.
On an overall basis, the total assets under management (AUM) of the mutual fund industry was pegged at Rs 44.39 lakh crore, higher than previous month’s AUM of Rs 43.21 lakh crore.
Investors putting money into the stock markets through the mutual fund route seem to be betting big on small-cap stocks as funds focused on this segment registered an all-time high monthly inflow of Rs 5,472 crore even as some other categories of equity funds witnessed net outflows in June.
According to data from Association of Mutual Funds in India (AMFI), small-cap funds registered the highest net inflows among all categories of equity funds in June and even bettered last month’s inflows of Rs 3,282.50 crore, which was a multi-month high.
Interestingly, the record flows came even as popular equity categories like large-cap and flexi-cap funds, equity linked savings schemes (ELSS) and focused funds all witnessed net outflows in June.
Even among those that saw net inflows–mid-cap, multi-cap, and large & mid-cap funds—the quantum of flows was much lesser than that of small-cap funds.
Experts attribute the trend to the correction witnessed in the small-cap universe and their potential to grow from the current levels amidst the overall stock market rally that saw the benchmark Sensex touch a new all-time record high of 65,898.98 intraday on July 7.
“Essentially, there is a rotation of stocks happening as people are withdrawing from large-cap funds and putting in small-cap schemes because they feel there is potential to make more gains in small caps. They believe that small cap equity valuations are very low due to correction and hence small-cap funds are seeing traction,” said N S Venkatesh, CEO, AMFI during his interaction with the media on Monday.
Further, when asked if investors are getting into riskier assets by moving towards small-cap stocks, he said that mutual fund schemes come with a lot of transparency and disclosures including a risk-o-meter and so investors are coming in fully understanding the risks.
“It depends on each one’s risk appetite… I think investors are coming in fully understanding the risks as there is a lot of transparency and disclosures by mutual funds including a risk-o-meter. Further, small-caps have corrected by more than 60 per cent so now they believe that this is the time that small-caps will start growing and there is potential for gains. On the corporate side as well, the earnings are going up irrespective of whether the company is a large-cap or a small-cap,” said Venkatesh.
Interestingly, index funds—that mirror benchmark indices like Sensex and Nifty among few other key indices—saw a marginal outflow of Rs 906 crore in June even as the benchmarks are currently hovering around record levels.
“Outflow in index funds was seen after a long time and it has been only marginal. Some profit booking could have happened as indices are at all-time high levels,” said Venkatesh.
On an overall basis, the total assets under management (AUM) of the mutual fund industry was pegged at Rs 44.39 lakh crore, higher than previous month’s AUM of Rs 43.21 lakh crore.