Beyond the hype: 5 under-the-radar stocks common across India's 3 largest smallcap portfolios

Indicating consensus among India’s top smallcap stock pickers, a small cohort of 5 stocks have managed to secure a foothold across India’s 3 largest smallcap mutual fund schemes.

Nippon India Small Cap Fund, the largest scheme in the category with assets of Rs 74,600 crore, HDFC Small Cap Fund with Rs 38,800 crore, and SBI Small Cap Fund with Rs 37,400 crore — together managing Rs 1.51 lakh crore of investor money — are all holding Kalpataru Projects International, Krishna Institute of Medical Sciences (KIMS), City Union Bank, PVR Inox and Carborundum Universal. Combined, the three schemes have parked about Rs 8,000 crore, or 5.34% of their pooled assets, in just these five names, shows data from ACE MF.

The conviction is sharpest at SBI Small Cap. The scheme has nearly a tenth of its entire portfolio riding on these five stocks alone, far ahead of HDFC Small Cap's 6.64% and Nippon India Small Cap's comparatively modest 2.49%.


KIMS is the single largest common bet by value, with the three funds together holding Rs 2,170 crore worth of shares. SBI Small Cap is the most committed, with 2.50% of its corpus in the stock (Rs 935 crore), ahead of HDFC Small Cap's 2.18% (Rs 845 crore) and Nippon India Small Cap's 0.52% (Rs 389 crore).


Kalpataru Projects International is a close second, with combined holdings worth Rs 2,100 crore. SBI Small Cap again leads the conviction trade, holding 2.76% of its portfolio in the stock (Rs 1,030 crore), against 1.56% for HDFC Small Cap (Rs 605 crore) and 0.63% for Nippon India Small Cap (Rs 473 crore).

City Union Bank ranks third, with a combined exposure of Rs 1,777 crore. PVR Inox and Carborundum Universal round off the list, with combined holdings of Rs 1,000 crore and Rs 990 crore, respectively.

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The common positioning comes as fund managers turn more constructive on the broader small- and mid-cap space following a prolonged correction. George Heber Joseph, CIO and CEO–Equity at ASK Investment Managers, framed the shift around the just-concluded earnings season: "Mid-caps delivered the strongest profit growth of 36% YoY vs 23% for small-caps and +10% for large-caps," he said, adding that "within SMID space, earnings leadership was broad based, with banks, auto, metals, telecom and real estate emerging as the key drivers."

"We would like to reiterate that against the backdrop of meaningful correction and robust earnings growth, we have selectively increased our exposure to the small and midcap space over the last two months," Joseph said. "We believe that investors with a long-term horizon must use these volatile times to accumulate domestic equities." Even so, he added, ASK's "tilt has been firmly towards largecap stocks – which are positioned attractive," even as the firm has "also taken advantage of recent correction to bag high-quality and growth companies from the small and midcap segment."

Monarch Networth Capital struck a similarly bullish note on the segment: "We are more bullish on small and midcap stocks," the brokerage said, noting that "time and value correction in a large section of SMIDs over the last 18 months has made bottoms-up stock picking in that cohort attractive."

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The optimism is borne out in index returns so far this calendar year. The Nifty Smallcap 100 is up 4.3% in CY26 and the Nifty Midcap 100 has gained 2%, even as the Nifty 50 has fallen more than 8% over the same period, making smallcaps the best-performing segment of the market. Mutual fund positioning more broadly remains skewed toward the broader market, with incremental allocations favouring mid- and small-caps, a trend the convergence across India's three largest smallcap schemes appears to reinforce.

Not every brokerage is convinced the segment is still cheap, however. JM Financial noted that large-cap indices are trading only slightly above their historical mean, while midcap and smallcap indices are trading at one standard deviation or more above the mean. On FY27 estimated price-to-earnings, the brokerage said midcaps are the most expensive at 26.8 times for the Nifty Midcap 100, followed by smallcaps at 24.5 times for the Nifty Smallcap 100, with the Nifty 50 the cheapest at 18.8 times.

The same hierarchy holds on a price/earnings-to-growth basis, JM Financial said, with the Nifty Midcap 100 at 1.3 times, the Nifty Smallcap 100 at 0.9 times and the Nifty 50 at 0.8 times, making large caps the cheapest of the three even on a growth-adjusted basis.

Flow data for May lends some support to the broader SMID narrative, even if it doesn't point directly to these five names. Mutual funds were net buyers in 56% of stocks during the month, with the sharpest month-on-month increase in buying recorded in Tata Technologies, Pine Labs, Indraprastha Gas, JSW Cement and Manappuram Finance.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)