Small-cap funds trail market gains

Mumbai, Nov 18 | Updated: Nov 19 2005, 05:56am hrs
Many of the mid- and small-cap stocks are yet to regain strength after the recent correction and this clearly reflects in most funds dedicated to stocks belonging to small-cap sector. Most of the 25 different schemes through which fund houses have invested in small-cap stocks in the range of 25-60% of their corpus, have witnessed a marginal return ranging 1-4% in the past three months.

According to data sourced from Value Research, Magnum Global fund boasts of the best return in the last three months at 8.35%. The fund has a 37.75% allocation for small-cap companies.

Incidentally, the returns have been further eroded in the last couple of days as till Tuesday (November 15), this was the only fund that boasted of a double-digit return in the last three months.

Experts are of the view that the experience of investors with small-cap stocks has not been pleasant in the last couple of months, which, when compounded with the regulatory action against penny stocks, has led to the erosion of returns from the mid- and small-cap funds.

"The markets were very shaky in the last three months with the benchmark indices witnessing a fall in excess of 10%. Whenever the markets are falling, the small-cap stocks are the worst affected and lose ground at a much faster pace as compared to the overall markets," said Dhirendra Kumar, CEO, Value Research.

Among the database of 25 schemes, Prudential ICICI Emerging Star has the highest allocation for small-cap companies at 56.54%. The fund has given returns of 6.49% in the last three months. Can Emerging Equities, which has given returns of only 2.27%, also has more than 50% allocation for small-cap stocks. Incidentally, most of the funds have given returns at less than 5% in the last three months.

LICMF Equity, Kotak Opportunities, BoB Growth, Magnum Emerging Businesses, Sundaram Smile, Tata Service Industries, UTI Master Value, Can Equity Diversified and ING Vysya Midcap have all given returns than 5% in the last three months. Two funds namely, JM Emerging Leaders and Tata Growth have, in fact, given negative returns in the range of 0-5% in the same period.