Mid and small cap funds find favour among investors

Five equity funds having exposure to mid and small cap stocks have received Rs. 1100 crore from April till September 2013.

Attractive valuations and decent returns generated by few mid and small cap funds over three and five year period has put these funds in the limelight. At a time when the industry is reeling under redemption pressure from equity funds these funds have managed to garner decent inflows from investors.

Value Research data shows mid and small cap funds like Reliance Equity Opportunities, ICICI Prudential Discovery, SBI Emerging Businesses, HDFC Mid Cap Opportunities and IDFC Premium Equity have collectively received inflows of Rs. 1090 crore during April - September 2013.

“If you look at mid and small cap indices, you will find that they are the worst affected by the volatility and economic slowdown in the recent past. However, most of the mid and small cap stocks today have greater potential to grow as they are available at bargain price thereby making them more attractive compared to large cap stocks,” says Vidya Bala, Head MF Research, fundsindia.com.

The BSE Mid Cap and BSE Small Cap index fell by 352 points or 5% and 641 point or 9% respectively on year to date basis. 

Nikhil Kothari of Etica Wealth Management believes that many mid and small cap stocks are trading at attractive valuations. “Since large cap have already performed well and touched all time high, mid and small cap funds are yet to take off in a big way. Also, many investors who have 60-70% exposure to large cap funds in their portfolios are reducing their exposure and investing in mid and small cap funds.”

DP Singh, CMO, SBI MF feels that investors are putting their money on performance irrespective of sector. Funds which have maintained a good track record over one, three and five year are getting good inflows, he added.

Source: Value Research

Apart from existing funds, recent new fund offers in the mid and small cap space have done well with NFOs of Axis Small Cap Fund, ICICI Prudential Value Fund, Reliance Closed Ended Equity Fund, Pramerica Midcap Opportunities Fund having collectively garnered close to Rs 1500 crore.

Currently, the NFOs of Sundaram MF (Sundaram Select Micro Cap Fund) and Reliance MF (Reliance Closed Ended Equity Fund Series B) are open for subscription. Reliance Closed Ended Equity Fund will have some exposure to mid-cap stocks while Sundaram Select Micro Cap Fund will invest in a portfolio of of micro-cap companies.