Smallcap funds are enhancing attention to ‘microcap’ amidst a number of boom in their assets. Their investment in shares below the top 500 has increased. Morningstar Direct data has shown that the average investment of smallcap funds in such shares increased from 22.4 per cent to 31.3 per cent in the last three years.
While the mutual fund (MF) industry recognizes only three market capitalization (M-cap) categories-largecap, midcap and smallcap, while the word ‘microcap’ is used by market analysts widely for markets that market capitalization Accordingly, the largest 500 companies are out.
Smallcap funds have been a favorite of investors for the last two years. This category earned an investment of over Rs 75,000 crore in a period of two years till December 2024. Complete management assets (AUMs) of smallcap funds increased by 2.53 times in two years to Rs 3.3 lakh crore.
Interest in smallcap funds has been seen due to a great rise in smallcap during the last two years. The great boom in the evaluation forced several funds to borders investment. As part of other measures to reduce the risk, funds have increased the number of shares in their portfolio. These measures have been seen as one of the reasons for increasing funds in microcap shares.
According to fund managers, the inclination towards microcap shares is not a planned step, but the result of their expanded scope and growing market penetration. Chandraprakash Padiyar, senior fund manager at Tata Asset Management, said, ‘There is no category called MicroP in the current definition. In smallcap funds we adopt bottom -up approaches and focus on identifying companies with good growth available on attractive evaluation. The overall scope for funds is very big. ‘
Mahesh Bendre, the fund manager of LIC Smallcap Fund, said that although the fund house does not distinguish between smallcap and microcap shares. But its strategy of investing in low -research and low -owned companies has increased investment in microcap. He said, ‘In our funds, the main focus is to identify companies with high quality and low research, so that their low evaluation can be availed. The reality is that the condition of liquidity in the smallcap segment has improved. ‘
In the last 3-4 years, the popularity of this segment has been clear from the bounce in the market cap of smallcap stocks. The data from the Association of Mutual Funds in India (Amphie) shows that the average market capitalization of the largest smallcap company (251st shares in the market capitalization rankings) increased from Rs 15,926 crore to Rs 15,926 crore during the second half of 2021 to 32,800 crore in the second half of 2024 during the second half of 2021. Reached the rupee. The average market capitalization of the 501st company increased from Rs 4,500 crore to Rs 11,300 crore.
Ventura Securities has said in a recent report, “The value of the stock which was ranked 251 in December 2019 has increased by 4 times today. Similarly, it has increased by 6 times for 500th company and 8 times for 1000th ranked company.