Mid and small caps funds have underperformed large cap funds in one month

MUMBAI: Mid and small cap funds have underperformed large cap funds in the month ended 31st January. According to Value Research, a mutual fund tracking entity, mid and small cap funds category has lost 1.28 per cent whereas large cap funds as a category gained 1.83 per cent.

While large cap funds have given returns in the range between +5.24 per cent and -1.16 per cent, mid and small cap funds have delivered in the range of +2.44 per cent and -5.45 per cent.

The inflows from foreign institutional investors have been chasing the large cap stocks in the CY2013, whereas the mid and small cap stocks have seen some profit booking after a good run in the last quarter of CY2012.

However, experts look at current dip in mid and small cap stocks, as a good entry point for investors. "You should allocate up to 30 per cent of your equity portfolio to mid and small cap funds," says Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

As economic recovery sets in, mid and small cap companies are expected to do better than the large cap companies. Investors however should take exposure to mid and small cap funds in a phased manner through systematic investment plans.

"If you cannot pick mid and small cap funds or not comfortable holding a dedicated mid and small cap fund, you can also consider multicap fund with long term track record," adds Vishal Dhawan.