Smallcaps to deliver robust returns in 3-5 years, says ICICI Pru MF's S Naren

Smallcaps are poised for strong growth and are expected to deliver robust returns over the next three-to-five years in comparison to largecaps and midcaps, said S Naren, Executive Director and Chief Investment Officer, ICICI Prudential Mutual Fund.

Speaking at a press conference in Mumbai to discuss equity markets, he said that despite smallcaps being high risk companies, they will deliver good returns.

At present, valuations of smallcap companies are reasonable after the recent market correction, Naren said. “The recent correct in the smallcap space has led to market cap divergence in terms of valuations."

In the overall market cap share, smallcaps -- those below the top 250 companies -- have decreased to 6 percent in 2013 from 9 percent in 2010. However, at the end of December 2019, the share of smallcaps stood at 10.5 percent, Naren explained.

Since February 2018 till December 2019, the m-cap of companies ranked from 251 to 500 have dropped 23.2 percent while that of beyond 501 companies have decreased by 56.5 percent.