Turning tide? Midcap, smallcap funds see 2x more inflows than largecaps in last 3 quarters

The money invested into the stocks in midcap and smallcap segments through the mutual fund schemes was two times more than that in largecaps over the last three quarters, data by the Association of Mutual Funds in India (AMFI) showed.

Midcap funds saw net inflows of Rs 14,632 crore in the last three quarters, and smallcap funds saw inflows of Rs 15,172 crore. Meanwhile, the net inflows into large cap funds was Rs 6,392 crore in the same period.

Despite selling in several midcap and smallcap stocks, the S&P BSE Midcap index managed to give 5% returns in the nine months ended December, and the Smallcap index about 2.5%. The largecap index gave 4% returns.

In the midcap space, stocks such as Bharat Electronics, Bank of India, Indian Hotels, M&M Financial Services, TVS Motor Co, Cummins India, CG Power and Industrial Solutions, Hindustan Aeronautics, and Varun Beverages have given 46-105% returns in the last 1 year.

In the smallcap space, atleast 33 stocks have given multibagger returns in the last one year, and these include names like South Indian Bank, Rail Vikas Nigam, Titagarh Wagons, Power Mech Projects, TCPL Packaging, Karnataka Bank, Vadilal Industries, Jupiter Wagons, Mazagon Dock Shipbuilders, BLS International, and Cressanda Solutions.

What should investors do?
While the latest earnings print of companies in the midcap and smallcap segments has been quite dispersed, analysts do expect growth to get better both on the revenue and profitability side.

“In the medium to long term, smallcaps have a very-very good potential in India to create shareholder wealth or investor’s wealth,” says Anupam Tiwari, fund manager at Axis Mutual Fund.

“So I am quite optimistic, but a lot depends on how you select a company, how you create a portfolio, but the opportunity is very-very good,” he added.

Meanwhile, Nitasha Shankar of YES Securities believes that a broad-based run-up in equities may not be seen given that valuations are still uncomfortable, and liquidity is slowing down.

“From what we have been gauging, companies with surety of growth from a 2-3 years perspective have been resilient and doing well. In short, a bottom-up approach is the way to go for now, especially in the mid- and smallcap space,” she said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)