Besides debt, commodities, and REITs & InvITs, multi-asset allocation mutual funds mainly invest in equities of different market capitalisation categories. Their allocation towards smallcap stocks has helped them deliver better returns
These smallcap stocks that had been moving sideways for over two years have now begun to rise noticeably over the past two months
As the market continues its record run, some smallcap stocks, including housing and infrastructure firms, have gained up to 848 percent in the past year, clocking big gains for mutual funds invested in these companies
The top 10 holdings of a mutual fund scheme drive its performance. This is especially true in case of concentrated funds, but even for well-diversified funds. Typically, weightage of a scheme’s top 10 holdings in a diversified equity fund is around 17-72 percent
As per the latest shareholding pattern data, mutual funds hold a significant portion in the total shares of these smallcap companies. This indicates fund managers’ optimism over the future growth prospects of these companies.
Quality smallcap stocks having higher growth potential rallied despite the universe witnessed huge volatility past year
Multi-cap funds are bound by SEBI regulations to diversify across large-cap, mid-cap and small-cap stocks. Due to their illiquid nature, multi-cap funds have a large holding of small-cap stocks
Sharp rise in prices of these small-cap stocks resulted in multi-fold increase in their market capitalisation, which in turn, marked their entry into the mid-cap space
Here are some small-cap stocks that have large growth potential but are more sensitive to market movements, and exhibit more volatility