Mid- & small-caps catch investor fancy

However, ensure that large-caps are the core of your long-term portfolio

- SAIKAT NEOGI

LARGE-CAP FUNDS, which can offer better risk-reward payoff, are seeing redemptions as retail investors are rebalancing portfolios by increasing investments in midcap and small-cap funds. Experts say those investors who are underweight on small-caps can rebalance their portfolios by investing in them but cautions about being overweight now. For an investment with a longer tenure, large-caps must form a significant share of core portfolios. And at this point in time, staggered investments into the segment will augur well for investors.

Large-cap active funds are increasingly struggling to beat the index even over 5-7 year timeframes, says Shrinath ML, senior research analyst, FundsIndia. "This prolonged underperformance could be the reason behind the weak flows. The outflows from large-cap funds in May could be due to some money moving into the small-cap funds on the back of strong performance of the small-cap segment," he says.

Nirav Karkera, head, research, Fisdom, citing an internal study on SIP investments conducted during the period from April 2020 to March 2022 amidst the Covid pandemic, says that mid and small-cap funds have consistently outshined their large-cap counterparts."This finding is further substantiated by the year-to-date data, revealing that the Nifty Midcap 150 and Smallcap 250 indices have yielded impressive returns of around 12%, while the Nifty 100 index has only managed a modest 3% return," he says.

Large-cap strategy