Investors show faith in mid- and small-cap funds despite negative returns, volatility

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Published: October 28, 2019 11:20:53 AM

Data from Amfi shows that in the period between April to September, mid-cap funds have seen inflows of Rs 6,346.31 crore and small-cap schemes have also seen inflows of Rs 6,336.89 crore.

The worst performance has been from Quant Small Cap Fund, which gave negative returns of 22.24% in the last one year. The worst performance has been from Quant Small Cap Fund, which gave negative returns of 22.24% in the last one year.

Investors continue to pour money into mid- and small-cap funds, even as the category generated negative returns over the last one year. In the first six months of the current financial year, both mid- and small-cap schemes have seen inflows of over Rs 12,500 crore, shows the data from Association of Mutual Funds in India (Amfi). Market participants say that flows are largely due to the investors’ participation through systematic investment plans (SIPs) and maturity of staying invested despite intense volatility and average funds returns.

Data from Amfi shows that in the period between April to September, mid-cap funds have seen inflows of Rs 6,346.31 crore and small-cap schemes have also seen inflows of Rs 6,336.89 crore. Data from Value Research shows that out of 15 small-cap schemes, 10 schemes have given negative returns in the last one year. The worst performance has been from Quant Small Cap Fund, which gave negative returns of 22.24% in the last one year. Axis Small Cap fund delivered the best returns at 22.64% in the same timeframe. The Nifty Smallcap 100 Total Returns Index (TRI) has declined 7.34% in the last one year, shows Value Research.

Jinesh Gopani, head equity at Axis Asset Management Company, says, “Investors have continued to invest across categories and not only in mid- and small-cap segment. Our simple thesis of investing in quality and good governed company has helped us across our equity schemes to deliver strong returns. A company or the management which looks after minority shareholders, we look at those companies and that is where we have managed to generate alpha.”

Of all the 23 mid-cap funds, only three schemes gave negative returns in the last one year, while Nifty Midcap 100 TRI has fallen 2.37% in the same period. Only four schemes in the mid-cap category gave retur-ns in the range of 11-17% in the last one ye-ar, while all other schemes gave single-digit returns. Returns are as on October 18, 2019.

Neeraj Choksi, joint MD at NJ India, one of India’s largest MF distribution firms, said, “At times mid- and small-cap funds have higher volatility, but it works in the long run and we advocate long term investment in this category. We are not seeing too many SIP stoppages despite negative returns in the last two years as returns for longer duration (four-five year) look positive. Apart from SIP, we are also witnessing lump-sum investment in this category as there is hardly any other financial avenue available for retail investors to invest.” If we look at returns in the last five year, on an average, mid- and small-cap funds have given returns of 10.33% and 9.86%, respectively.

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