Market rally drives small-, mid-cap funds higher in June quarter

Written by fe Bureau | Mumbai | Updated: Jul 31 2014, 07:21am hrs
The small- and mid-cap category have logged the maximum gains in the quarter ended June. The Crisil-Amfi Small & Midcap Fund Performance Index, which represents the performance of small- and mid-cap funds, appreciated 28.9% during the quarter, higher than the Crisil-Amfi Large Cap Fund Performance Index (up 18.9%) and Crisil-Amfi Diversified Equity Fund Performance Index.

Click here for graph

Attractive valuations, coupled with a positive market sentiment, helped small- and mid-cap stocks outperform the broader market, according to Crisil Research.

For instance, the PE multiple of CNX Midcap was 14.3x on March 31, 2014, a perceptible discount to its historical peak of 26.3x in January 2008.

While Crisil-Amfi Small & Midcap Fund Performance Index outperformed the broad market CNX 500 (up 18.69%), it could not beat the category benchmarks CNX Midcap Index (up 30.32%) and CNX Smallcap Index (up 48.41%). The under-performance was mainly due to the average exposure of about 22% to large-cap stocks (top-100 stocks based on daily average market capitalisation on the NSE). CNX Nifty gave returns of 13.67% in the quarter ended June, helped by expectations and the formation of a stable government at the Centre.

Within the small- and mid-cap category, Crisil Fund Rank 1 funds, as of the quarter ended June 2014, were overweight on sectors such as industrial products and chemicals. The average over-exposure of these vis--vis the category average to these sectors was 4.9% and 3.1%, respectively, which helped them outperform the category.

Birla Sun Life MF had eight Crisil Fund Rank 1 funds, followed by UTI MF with six, and ICICI Prudential MF and Reliance MF with five funds each. The latest Crisil Mutual Fund Ranking covers close to 90% of the average assets under management of open-ended schemes at the end of June. Crisil MF Ranking uses a combination of NAV and portfolio-based attributes for evaluation.

This provides a single-point analysis of mutual funds, taking into consideration key parameters such as risk-adjusted returns, asset concentration, liquidity, asset quality and asset size. The ranks are assigned on a scale of 1 to 5, with Crisil Fund Rank 1 indicating very good performance.