Minnows beat giants

MUMBAI: The year 2014 has turned out to be the best year for those mutual fund investors who had bet big on the small and mid cap stocks. During the last one year, the small and mid cap schemes offered by fund houses have outperformed all other schemes by a huge margin. According to the data available with Value Research, a mutual fund tracking firm, the small and mid cap schemes have delivered an average return of 77.62 per cent.

This means, if an investor had invested Rs1 lakh a year back, his or her investment would be now worth Rs1.77 lakh. Some of the small and mid cap schemes have even delivered over 100 per cent returns during this period.While the small and mid cap segments have emerged clear winners in 2014, experts said that these stocks may not be able to deliver the same kind of return in 2015. However, they are still expected to outperform the large cap stocks.

“The small and mid cap stocks were hammered badly in 2013 when global investors started pulling out money from the domestic market. Following this, there was a huge valuation gap between large cap and small cap funds. This is one of the reasons why these stocks had outperformed the large cap stocks as and when the market sentiments improved drastically,” said Gopal Agrawal, head of equity at Mirae Asset Global.  

While Sundaram SMILE fund has posted a return of 111.47 per cent during the past one year, SBI small and mid cap fund and Reliance small cap fund have generated a return of 109.04 per cent and 106.43 per cent respectively during the same period.  “The huge valuation gap between the large cap and small cap stocks has been largely bridged.

However, with the macro- economic factors showing signs of recovery and global liquidity expected to remain strong, the small and mid cap stocks are expected to do well for the next couple of years. They are expected to generate superior returns compared to the large cap stocks,” said Navneet Munot, chief investment officer, SBI mutual fund.S Krishna Kumar, head of equity at Sundaram MF pointed out that the small and mid cap stocks were trading at a huge discount to the market till a year back. However, with an improvement in risk appetite, both domestic as well as global investors are now willing to look beyond the large cap stocks.