Smallcap mutual funds see jump of 27% in monthly inflows despite index correction of 3%

The smallcap mutual funds have witnessed a jump of 27% in monthly inflows in November despite the smallcap index Nifty Smallcap 250 – TRI correcting 3% in the same period. Market experts say that investors continued to favour midcap and smallcap funds, both of which recorded robust inflows supported by various factors.

Himanshu Srivastava, Principal Research, Morningstar Investment Research India, said that investors continued to favour midcap and smallcap funds, both of which recorded robust inflows supported by strong trailing returns, broad earnings delivery, and the perception of superior long-term compounding potential in these higher-growth segments.

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Srivastava added that intermittent corrections in these pockets also provided attractive entry points.

In November, the smallcap funds received a total inflow of Rs 4,406 crore against an inflow of Rs 3,476 crore in October. The Nifty Smallcap 250 – TRI corrected 3.29% in the same period.

The other risky category, midcap funds, received a total inflow of Rs 4,486 crore in November against an inflow of Rs 3,807 crore in the last month, registering a growth of 18% on a monthly basis. The Nifty Midcap 150 – TRI gained 1.66% in the said period.

"Mid-cap and small-cap schemes continued to see healthy inflows, broadly in line with their 12-month average of around Rs 4,500 crore," said Ashwini Shami, President and Chief Portfolio Manager,OmniScienceCapital.

Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India), said that within market caps, flows into midcap and smallcap categories have been modest with slight upside this month compared to the last.

Smallcap mutual funds delivered a negative average return of 1.76% in November. There were 31 smallcap funds in the said period, of which Tata Smallcap Fund lost the most, around 4.50%, in the said time period. Only two smallcaps, DSP Smallcap Fund and Quantum Smallcap Fund offered positive returns of around 0.64% and 0.24% respectively.

Midcap funds gave an average return of 0.55% in the same period. There were 31 midcap funds as well, of which WOC Midcap Fund gave the highest positive return of around 2.16% in November, followed by HDFC Midcap Fund, which gave a 2% return in the same period. Taurus Midcap Fund lost the most, around 0.86%, in the same period.

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Srivastava recommends that investors should ideally approach these categories with a long-term perspective rather than basing allocations solely on short-term performance trends.

According to AMFI data, one smallcap fund was launched in November. Helios Smallcap Fund collected Rs 476 crore in the said period.

The AUM of midcap funds jumped 2% on a monthly basis to Rs 4.61 lakh crore, whereas that of smallcaps dipped by 1% to Rs 3.69 lakh crore in November.

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

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