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Small-Cap Schemes Fared Best

May 18, 2022 09:54 IST

On an average, small-cap funds have generated annualised returns of 67.5% in the last two years.
Large-cap funds and mid-cap funds have given average annualised returns of 41.3% and 53.4% respectively.

Illustration: Dominic Xavier/

Small-cap oriented schemes have fared the best, based on the two-year performance of pure-play equity funds.

Data from Value Research shows that out of 308 pure equity funds (sectoral and international funds are excluded), around 70 have managed to deliver annualised returns in excess of 50 per cent over the two-year period ended March 31, 2022.

Half of the best-performing schemes over the period are from the small-cap category.

Quant Mutual Fund's small-cap fund has managed to deliver the highest annualised returns of 108%, followed by that of Canara Robeco MF, and Nippon India MF, with annualised returns of 81% and 77% respectively.

On an average, small-cap funds have generated annualised returns of 67.5% in the last two years.

While large-cap funds and mid-cap funds have given average annualised returns of 41.3% and 53.4% respectively, shows the data from Value Research.

After witnessing a sharp correction in March 2020, small-cap and mid-cap stocks had delivered strong performances on the back of low valuations, a global liquidity gush, and government measures to boost the manufacturing sector.

Vaibhav Porwal, co-founder, Dezerv, a wealth management company, says, "Between 2018 and March 2020, large-caps outperformed small-caps and mid-caps by a big margin. As we entered in March 2020, small-cap and mid-cap stocks had become undervalued. Secondly, many retail investors who opted for direct investing post March 2020 focused on small- and mid-cap stocks. All these factors created a conducive environment for the broader markets to perform."

In the last two financial years, the BSE 250 Small-cap Total Return Index had generated 71% returns, while BSE 100 Total Return Index gave returns of 45% on an annualised basis.

Out of 23 small-cap schemes, 11 have managed to deliver better returns than the category average of 67.5%.

Out of 29 mid-cap schemes in the industry, 16 schemes managed to beat the category average returns of 53.4%.

PGIM India Midcap Opportunities and Quant Midcap Fund have managed to give returns of around 71% in the last two years.

Even over a three-year period ended March 31, 2022, small-cap funds remain in the limelight.

Out of 10 schemes that have generated the highest returns in the last three years, five are from the small-cap category.

Quant Smallcap Fund and BOI AXA Smallcap Fund are the schemes with highest returns of 36.6% and 34.9% respectively.

On an average small-cap schemes have given returns of 25.4% over a three-year period.

However, industry officials say the returns seen in the last two years will be difficult to repeat as valuations of many stocks have turned expensive.

D P Singh, chief business officer, SBI MF says, "Mid and small-caps are evolving sectors where there will be rotation among winners and losers. Fund houses that have a strong research background and a good fund manager will be the key to success while managing such funds."

However, if we look at the performance of large-cap funds in the last two years, most of the top performing funds are from the passive side.

Among the top 10 large-cap schemes, only one is actively-managed.

Here again, Quant Focused Fund has managed to top the chart with annualised returns of nearly 52% in the last two years.

"We are constantly asking our investors to invest in index funds if they want an exposure to large-cap funds. We believe that it will be difficult to identify 50 stocks from top 100 in the large-cap category. But the stocks universe for mid and small-cap is quite large and gives an opportunity to fund managers to beat the benchmark indices," added Porwal.

Among the other categories, multi-cap funds have given annualised average returns of 50%, while flexi-cap and large-and-mid-cap category of funds have given 42% and 46% respectively.

Market participants say with the possibility of a rise in interest rate, it's better to stick with large-cap funds to sail through the volatility.

Chirag Madia
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