The remaining six schemes, Sundaram BNP Paribas Select Small Cap, HSBC Small Cap, JPMorgan Smaller Companies, Franklin India Prima, Franklin India Smaller Companies, and ING Vysya CUB, have provided returns ranging between 44% and 57% on a trailing 12-month basis. These schemes manage varying amounts, from `46 crore to `954 crore.
Although four of these funds were launched during the peak of the previous bull run, investors have endured significant losses during subsequent market downturns. Despite this, the DSP fund has been recognized by mutual fund tracking firm Value Research for its impressive performance, noting that it holds credible stocks with high returns on equity and strong leadership positions in their respective industries. The closed-ended nature of some of these funds has helped them withstand market turbulence, as they did not face redemption pressures. Value Research CEO Dhirendra Kumar highlighted the DSP fund’s recent transition to an open-ended structure, with nearly 10% of the fund’s `311-crore corpus being kept in cash to manage redemptions and seize market opportunities.
In India, there are 10 small-cap funds managing approximately `3,450 crore in stocks, accounting for just 2% of the total AUM under equity schemes.
Market experts attribute the shift towards small-cap stocks to the relatively unattractive valuation of large-cap stocks. Stocks like Symphony and VIP Industries have led the small-cap rally, with Symphony surging 830% and VIP rising 548% in the past year. In comparison, the top performers on the Sensex, Tata Motors and Tata Consultancy Services, have seen gains of 135% and 61% respectively.
Experts advise caution when investing in small-cap funds due to their volatile nature. They recommend that investors allocate only 10-15% of their equity exposure to such funds or companies.
“Investors should have a strong stomach and the ability to withstand substantial declines in such funds,” says Mr Kumar at Value Research.