Small and mid cap funds outperform large firms

Mumbai: The equity small and mid cap funds offered by domestic mutual funds have managed to outperform large cap funds during the current round of the bull market rally that started during the first week of March 2016.

According to the data available with Value Research, a mutual fund tracking firm, the small cap funds have given an average return of over 19 per cent during the last three months while the mid cap funds have provided a return of 16.61 per cent.

During the same period, large cap funds have generated a return of 15.51 per cent. Data showed that the net asset value (NAV) of some of the small cap fund have even grown by over 20 per cent during this period. “It was the small and mid cap stocks that were beaten down badly during the global ‘risk-off’ trade during the first two months of this years. The lack of enough liquidity in these counters also led to steep fall in their prices because of which they underperformed their large cap peers,” said S. Krishna Kumar, chief investment officer (CIO), equity, Sundaram MF.

With emerging market sentiments improving amidst a recovery in global commodity prices, Mr Krishnakumar said the small and mid-cap stocks with attractive valuations turned out to be the major beneficiary of the global liquidity driven ‘risk-on’ trade. While Sundaram Smile Fund has given a return of 21.14 per cent during the period, DSP BlackRock Micro Cap Fund and HSBC Equity Mid Cap Fund have rewarded investors with over 23 per cent return.

According to Ambareesh Baliga, senior research analyst, small and mid cap stocks are likely to outperform their large cap peers in coming days. “With risk appetite returning, small and mid cap stocks gathered pace and this trend is expected to continue,” he said.