Vijaya Diagnostic, Dr Lal Path Labs: Small-cap funds bet on industrials, pharma in May; check details

Small-cap mutual fund managers stepped up their buying in industrial products and pharmaceutical stocks in May 2026, while trimming exposure to electrical equipment companies, according to an analysis of portfolio changes across 19 leading fund houses.

The analysis, which tracks buy and sell decisions of top small-cap funds between April and May 2026, showed fund managers remained bullish on sectors linked to manufacturing, healthcare and consumer spending.

Overall, fund houses made 771 buy actions during the month, comprising 58 fresh buys and increased exposure to 263 stocks. Industrial Products emerged as the most favoured sector with 31 fund actions spread across 24 stocks. Pharmaceuticals & Biotechnology and Consumer Durables followed closely with 30 fund actions each, while Finance and Auto Components also witnessed strong accumulation. Healthcare Services, Banks, Retailing and Commercial Services were among the other sectors attracting investor interest.

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Diagnostic and healthcare stocks

Among stocks where fund managers raised their exposure the most, Vijaya Diagnostic Centre topped the list, with five asset management companies (AMCs) increasing holdings. These included Motilal Oswal, HSBC, HDFC and Edelweiss.

Dr. Lal Path Labs and Navin Fluorine International were next, with four AMCs each increasing exposure. Computer Age Management Services (CAMS) and Safari Industries India also saw buying from four fund houses.

Other stocks witnessing increased exposure included Firstsource Solutions, Krishna Institute of Medical Sciences, Neuland Laboratories, State Bank of India, Timken India, Angel One, Gland Pharma, V-Mart Retail, eClerx Services and Equitas Small Finance Bank.

Top fresh bets

On the fresh purchase front, Honasa Consumer Ltd., the parent company of Mamaearth, emerged as the most popular new addition, with two fund houses — Helios and Trust Mutual Fund — initiating positions.

Gujarat Gas and Exide Industries were the next most prominent fresh buys, attracting interest from Franklin Templeton, Bandhan Mutual Fund, Nippon India Mutual Fund and Quant Mutual Fund.

Other new entrants to small-cap fund portfolios included Q-Linea Biotech, Kalpataru Projects International, Delhivery, RR Kabel, Eternal, NTPC, ABB India and Intellect Design Arena.

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Under pressure

While buying remained broad-based, electrical equipment emerged as the sector under the most pressure during the month. Fund managers reduced exposure to several names in the segment as part of their portfolio rebalancing.

Among individual stocks, GE Vernova T&D India saw the sharpest reduction in holdings, with five AMCs cutting exposure. CCL Products (India), Multi Commodity Exchange of India (MCX), Aster DM Healthcare and MTAR Technologies were among the other stocks witnessing notable selling activity, with three fund houses each reducing their positions.

The analysis also highlighted complete exits from certain stocks. Central Depository Services (India) Ltd (CDSL), Gujarat State Petronet and newly listed electric two-wheeler maker Ather Energy were among the companies that saw some fund houses completely exit their positions.

The latest portfolio reshuffle suggests that small-cap fund managers continue to favour themes linked to domestic manufacturing, healthcare and consumption, while taking profits in select pockets where valuations have become stretched.

With industrial products and pharma leading sectoral inflows, fund managers appear to be positioning portfolios to benefit from India's ongoing capex cycle and resilient demand trends.

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