Many smallcap funds holding huge quantum of largecap stocks

Published 27-11-2023, 10:28 pm
© Reuters.  Many smallcap funds holding huge quantum of largecap stocks

New Delhi, Nov 27 (IANS) Besides cash, many smallcap schemes are holding huge quantum of largecap stocks.The deployment into largecap stocks by smallcap funds began from May 2022 and continues to expand, showcasing the fund managers' concerns on the smallcap space, as per a report by Elara Securities.

Currently, 6 per cent of total smallcap AUM is deployed into largecap names (previous high was seen in April 2019).

A similar trend was seen where smallcap funds were moving into largecaps from January 2018 to April 2019.

"However, during that period, we also saw smallcap stocks underperforming largecap, hence the move was supportive to their positioning. This time, due to the direct retail participation in smallcap space, we are seeing a strong outperformance in the smallcap index. This is hurting the performance and has potential of creating a panic among smallcap fund managers if this trend fails to reverse," the report said.

As of October 23, smallcap schemes are holding Rs 15,500 crore (7.8 per cent) of cash and Rs 12,500 crore (6.3 per cent) of largecap stocks.

Average cash levels since 2018 in smallcap schemes is around 6.6 per cent, indicating excess cash of 1.2 per cent.

Likewise average largecap holding in smallcap schemes since 2018 stands at 4.4 per cent, an excess of 1.85 per cent.

This translates into excess of Rs 6,100 crore (cash + largecap), which needs to be deployed to reach back to long-term average.

Add to this the consistent inflows into small cap schemes even now. The performance of small cap index is still not willing to reverse. Post the Israel-Palestine conflict that started in October, FMs had some hope of smallcap underperformance, but the strong revival after that is again creating pressure, the report said.

--IANS

biz/san/arm

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.