Tapering inflows into mutual funds since the beginning of the calendar year 2016 were in line with the BSE mid-cap index correcting close to 9% in the same period, as retail investors who drive fund flows are known to be more attuned to the mid-cap space.
Fund managers expect mutual fund inflows to slow further — for the month of January Rs 2,500-3,000 crore of buying is expected, compared with an average monthly flow of Rs 8,000 crore in CY15 — and the performance of mid-cap stocks may remain under pressure.
The sectoral index for mid-cap companies outperformed the benchmark indices in the calendar year 2015. The BSE mid-cap index gained nearly 10% during 2015 even as the benchmark Sensex declined 5%. Ten of the mid-cap index constituent companies yielded more than 40% returns in 2015. Bajaj Finance and Ashok Leyland were among the best performers in the index as their shares jumped nearly 70% during 2015.
This outperformance led to steep increase in valuations of mid-cap shares. The one year forward valuations of the BSE mid-cap index touched its life-time high of 27 times by the end of December, Bloomberg data showed.
