Despite market fluctuations and high valuations, investors continue to show a preference for small and midcap stocks over largecaps. In April, equity mutual fund schemes registered the lowest inflow in four months, totaling Rs 18,900 crore, as reported by Nuvama Alternative and Quantitative Research.
Investment flows into small and midcap (SMID) schemes remained strong at Rs 4,000 crore, contrasting with the more subdued Rs 2,200 crore that flowed into largecap schemes. This trend counters the traditional view that blue-chip stocks are safer during volatile periods.
Nuvama’s analysis shows that SMID schemes accounted for 21% of the total equity scheme inflows. Despite a market correction in March, investor interest rebounded in April, with small-cap schemes attracting Rs 2,200 crore, reversing a Rs 100 outflow on March 24. Midcap schemes also saw a rise, pulling in Rs 1,800 crore as compared to Rs 1,000 crore previously. Nuvama suggests that investors adopt a 3 to 5-year investment horizon to counteract high valuation levels and potential disappointments.
The report also detailed activity in pure equity schemes:
Midcap: Key purchases were made in Bharti Hexacom (IPO), Vodafone Idea (FPO), and Indus Towers, with significant sales in LIC Housing Finance, Indraprastha Gas, and Federal Bank. Bharti Hexacom and Vodafone Idea were noted as new entries, while Patanjali Foods was a complete exit.
Small cap: Notable acquisitions included Angel One, ICICI Securities, and Sterlite Tech. The highest sales occurred in Atul, Blue Star, and Gujarat State Petronet. New entries featured Sterlite Tech and JNK India (IPO),
with exits including Shree Digvijay Cement, Ashiana Housing, and Valiant Organics.
Despite efforts by fund houses to promote diversification, largecap schemes struggled to attract substantial investor interest, seeing only modest inflows.
Key trading activities in largecap stocks: Significant buying in Kotak Mahindra Bank, HDFC Bank, Axis Bank, and Vedanta, with major sales in Jio Finserv, Bajaj Finance, ICICI Bank, and Bharat Electronics.
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