Over the past year, while the Nifty50 is up 27.4 per cent, the Nifty Midcap 150 has risen 56 per cent and the Nifty Smallcap 250 is up 65.9 per cent. Both mid and small-cap funds have witnessed heavy inflows over this period. After such a humongous run-up, investors need to turn extremely cautious in these segments.
Risks higher in smallcap funds
The risks, say experts, are greater in smallcap funds than in midcap funds. "Smallcap schemes have larger exposure to stocks outside the top 500 stocks in terms of free-float market cap. These more volatile stocks have run up a lot in the recent past," says Abhishek Kumar, a Securities & Exchange Board of India (Sebi)-registered investment advisor and found SahajMoney. Smallcap funds have lower exposure to large-cap stocks. They also have lower cash positions that can support large redemption requests.
Key risks Valuation: Small and midcap stocks' valuations have turned rich. "Historically, such run-ups have often been followed by a market correction or a time correction, as seen in 2017-18," says Kaustubh Belapurkar, director-manager research, Morningstar Investment Advisor.
Denne historien er fra March 05, 2024-utgaven av Business Standard.
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Denne historien er fra March 05, 2024-utgaven av Business Standard.
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