Small-cap mutual funds’ assets soar 83% to Rs 2.43 lakh cr in FY24 on retail investor boom
The number of folios reached 1.9 crore in March 2024 from 1.09 crore a year ago
NEW DELHI: Influx of flows, upsurge in retail investors’ participation and bullish market conditions have boosted the assets for the small-cap mutual fund category to Rs 2.43 lakh crore mark at the end of March 2024, marking an 83 per cent surge compared to the previous year.
The surge in assets was complemented by an increase in the number of investors, with the number of folios reaching 1.9 crore in March 2024 from 1.09 crore a year ago, adding an investor base of 81 lakh. This shows investors’ inclination for small-cap funds.
Gopal Kavalireddi, Vice President - Research at FYERS, said that the growth trajectory of India’s economy is attracting increased interest, leading many unlisted small-cap firms to seek support from the capital market. This trend offers promising opportunities for investors eyeing long-term growth prospects.
However, factors such as
General Elections, monsoon forecasts, economic activity, inflation, GDP projections, and FY25 earnings growth are likely to influence small-cap company valuations and induce volatility in this segment, he added.
In the financial year 202324, small-cap funds witnessed an inflow of Rs 40,188 crore, way higher than the Rs 22,103 crore inflow seen in the preceding fiscal.
However, the month of March saw small-cap funds witnessing a net outflow for the first time in over two years at Rs 94 crore.
This came after markets regulator Sebi, in late February, raised concerns over froth building up in the small and mid-cap funds and directed mutual fund houses to put in place a framework to safeguard the interest of investors, who invested in these funds.
The concerns came in the backdrop of huge flow in the small and mid-cap schemes of mutual funds over the past few quarters.
According to the data from Association of Mutual Funds in India (AMFI), the asset under management (AUM) of the small-cap mutual fund hit its peak of Rs 2.43 lakh crore at the end of March 2023 as compared to Rs 1.33 lakh crore in March 2022.
Kavalireddi attributed the huge surge in assets to several factors such as attractive returns, positive investors’ sentiment, portfolio diversification and a rise in retail participation.
“Smallcap index itself has grown 60 per cent in FY24, accounting for the majority of the growth in AUM,” Jay Shah, Founder and CEO of Finwisor, said. Also, the current positive sentiment among investors, bolstered by strong economic activity and earnings growth, has been a key factor driving increased allocations towards small-cap funds.
Moreover, small-cap funds gained traction as an attractive element of diversified portfolios, benefiting from their potential for significant growth and undervaluation observed in FY23, amid the influx of investments into equities.
Overall, the AUM of equityoriented mutual fund categories jumped 55 per cent in fiscal 2024 to Rs 23.50 lakh crore, led by strong inflows and markto-market gains. The category saw net inflows of Rs 1.84 lakh crore in FY24, up from Rs 1.47 lakh crore in the previous fiscal.
Under Sebi’s rule, in smallcap mutual funds, fund managers are required to invest at least 65 per cent of their portfolios in small-cap stocks.
Looking forward to FY25, Finwisor’s Shah said, “Smallcap returns have not just been an outcome of market sentiment, but also fantastic earnings growth. However, it has been historically observed that periods of euphoria are followed by periods of low returns. Accordingly for FY25, the likelihood of negative to low returns is the highest”.
Although small-cap funds offer appealing growth prospects, these are marked by elevated volatility, reduced liquidity, unpredictable market risks, and limited research coverage. Therefore, industry experts suggested that it’s crucial for investors to thoroughly assess their risk tolerance and investment horizon before contemplating investments in this segment.
NEW DELHI: The government has notified specifications of a new product ‘Nano Urea Plus’ fertiliser to be manufactured by cooperative IFFCO in the country for the next three years.
Nano Urea Plus is a new version of nano urea meant for meeting crop nitrogen requirements at critical growth phases.
As per the gazette notification, the government has approved Nano Urea Plus in liquid form with 16 per cent nitrogen content and pH value of 4-8.5 and viscosity of 5-30.
This product will be manufactured by the cooperative major IFFCO for a period of three years, it said.
“IFFCO’s Nano Urea Plus is an advanced formulation of Nano Urea in which nutrition is redefined to meet crop nitrogen requirements at critical growth phases. It is used in place of conventional urea and other nitrogenous fertilisers for promoting soil health, farmer’s profitability & sustainable environment,” IFFCO Managing Director and CEO U S Awasthi said on a social media platform X.
It also enhances the availability and efficiency of micronutrients. It is a chlorophyll charger, yields booster and helps in climate-smart farming, he added.
IFFCO launched the world’s first ‘Nano liquid urea’ fertiliser in June 2021. Thereafter, it came up with ‘Nano DAP’ fertiliser in April 2023.
The surge in assets was complemented by an increase in the number of investors