scorecardresearchSmall cap funds outperformed larger peers last year but will the party continue?

Small cap funds outperformed larger peers last year but will the party continue?

Updated: 25 Apr 2022, 07:26 AM IST
TL;DR.

The returns given by small cap mutual funds, as a category, were 37.33 percent, whereas large cap funds gave 17 percent return

Small-cap funds, on an average, have given annualised returns of 67.5 per cent in the past two years

Small-cap funds, on an average, have given annualised returns of 67.5 per cent in the past two years

In the financial year ending March 31, 2022, small cap funds — as a category — performed the best. When compared with the mid cap and large cap mutual funds, returns posted by small cap funds were the highest i.e., 41.01 percent. This was followed by the returns posted by mid cap funds at 29.47 percent. The lowest returns were posted by large cap funds at 22.83 percent.

Mutual fund category     Return (%)
Small cap          37.33
Mid Cap                       24.47
Large Cap                   17.08

(Source: Mutual Fund India, as on Mar 31, 2022)

On an average, small-cap funds have given annualised returns of 67.5 per cent in the past two years. On the other hand, large-cap and midcap funds posted average annualised returns of 41.3 per cent and 53.4 per cent, respectively, Value Research data shows.

Vaibhav Porwal, co-founder, Dezerv, a wealth management company explains this phenomenon quite aptly. He argues that until March 2020, large-caps outpaced small-caps and mid-caps by a wide margin. As a result, in March 2020, small-cap & midcap stocks turned undervalued thus offering better growth opportunity.

On the top of it, many retail investors who chose direct investing after March 2020 invested heavily in small and mid-cap stocks. These factors collectively played a role in small cap funds outperforming their peers in fiscal 2022.

S Sridharan, founder and principal officer, Wealth Ladder Direct, extends the same argument by saying: “Predominantly in 2021 most categories did well but later the correction happened in large and midcap stocks that led to relatively higher returns by small cap category funds.”

Top performing large cap funds in FY 2022

Large cap funds                                 Return (%)
Invesco India Large Cap fund26.12
Nippon India Large Cap Fund          26.11
IDBI India Top 100 Equity                25.32
ICICI Prudential Bluechip Fund        23.02

(Source: AMFI data)

As we can see the best performing large cap funds included Invesco India funds, Nippon India large cap fund and IDBI India Top 100 Equity fund which gave a return 26.12 percent, 26.11 percent, 25.32 percent, respectively.

Top performing mid cap funds

Mid Cap funds                                                Return (%)
Quant Mid Cap Fund                                    52.38
Motilal Oswal Midcap 30 Fund                      39.85
PGIM India Midcap Opportunities Fund       37.76
Aditya Birla Sun Life Mid Cap Fund            31.89

(Source: AMFI data)

In the mid cap category, the best performing funds included Quant Mid Cap, Motilal Oswal and PGIM which gave returns of 52.38 percent, 39.85 percent and 37.76 percent, respectively.

Top performing small cap funds

Small Cap fundsReturn (%)
Quant Small Cap Fund60.79
Canara Robeco Small Cap Fund                    60.06
L&T Emerging Businesses Fund              50.89
BOI AXA Small Cap Fund                     45.54

(Source: AMFI data)

In the small cap category, the highest returns were posted by Quant Small Cap, Canara Robeco, and L&T Emerging Businesses Fund, among others.

Aside from this, large cap funds received the maximum net inflow at 3,052 crore in March this year, as per the latest AMFI data. This was followed by the inflow in mid cap funds i.e., 2,193 crore, whereas small cap funds received the lowest inflow at 1,695 crore.

At the same time, the net assets under management (AUMs) were highest in case of large cap funds at 2.26 lakh crore in March 2022, followed by 1.59 lakh crore of mid cap funds and the lowest at 1.06 lakh crore of small cap funds.

First Published: 25 Apr 2022, 07:26 AM IST