Complimenting the strong run that mid- and small-cal stocks saw in financial year 2014-15, mutual fund schemes based on this theme have delivered solid returns to investors. In the year that the BSE Mid-cap and BSE Small-cap index increased by 49.5% and 54% respectively, funds from the small- and mid cap category outperformed other equity categories, with a few delivering returns in excess of 100% and some others clocking returns of around 70%
HDFC Midcap Opportunities Fund whose assets at the end of March 2015 stood at R9,645.80 crore from R3,525.10 crore at the end of March 2014. ICICI Prudential Discovery Fund’s assets increased to R9.075.36 crore as on March 2015 compared to R3,356.94 crore in March 2014, according to data from Value Research.
Even funds which started off on a low base gained significant ground. Birla Sun Life Pure Value Fund which had assets of R51.13 crore at the end of March 2014 went up to R424.67 crore in March 2015, a rise of R373.54 crore. Similarly, Canara Robeco Emerging Equities Fund had assets which stood at R42.51 crore as on March 2014, registered a growth of R360.39 crore.
Market participants say that the consistent rise in equity markets since the start of 2014 and smart bets on stocks that are potential beneficiaries of the revival in the Indian economy, helped fund managers generate strong returns. Overall, equity mutual funds saw net inflows of around R68,000 crore in financial year 2014-15, .
On an average, mid- and small cap category gave returns of 71.36% in the last one year, while large and mid cap funds and large cap funds, on an average, gave returns of 46.73% and 35.87% respectively.
But going forward fund managers may have to exercise caution. Valuations of many stocks in the broader market have surged and fund managers may be hard pressed to find attractive opportunities going forward. “It will be a challenge for fund managers to find companies in the mid- and small-cap segment as many are trading at very high valuations. We are advising investors to not put their entire investments into this category and rather look at investing into diversified equity funds with exposure of 20-30% into mid- and small-cap funds,” concluded Bala.
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