Now Reading: Smallcap, midcap funds hit 30% of active equity MF folios
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Smallcap, midcap funds hit 30% of active equity MF folios
Smallcap and midcap (SMID) funds now account for nearly 30% of active equity mutual fund folios, up from 19% in July 2022. In July, the two categories added a combined 815,000 folios,…
Smallcap and midcap (SMID) funds now account for nearly 30% of active equity mutual fund folios, up from 19% in July 2022. In July, the two categories added a combined 815,000 folios, an 11-month high, and recorded net inflows of nearly Rs 14,000 crore, an all-time peak.
The surge is driven by strong stock performance: the Nifty Smallcap 100 and Nifty Midcap 100 indices have risen 31% and 22% respectively since April, far outpacing the Nifty 50's 9% gain. The shift has come at the cost of largecap funds, whose share of total folios fell from 14.4% to 9% in four years.
Experts attribute the trend to investor confidence in high-growth segments, but note liquidity risks as fund sizes swell. The largest smallcap scheme, Nippon India Smallcap Fund, managed Rs 79,000 crore as of June. The Securities and Exchange Board of India has increased mandatory disclosures for SMID funds in response.
Indian Opinion Analysis
The shift of retail money into smallcaps and midcaps mirrors a pattern seen before the 2018 correction, when frothy flows forced Sebi to introduce stress tests and exit-load frameworks. What is different now is the scale: Rs 14,000 crore in a single month is unprecedented for these categories. The real risk is not just liquidity in a downturn but the concentration of assets in a handful of schemes. If the top three smallcap funds collectively manage over Rs 1.5 lakh crore, even a 5% redemption wave could trigger forced selling in illiquid stocks. Investors should watch Sebi's next disclosure cycle for portfolio concentration ratios.
Source: rediff.com
This story was synthesised by AI from the source linked above.
