Small-cap and Mid-cap funds still shine

For the mid-cap and small-cap indices, the year 2018 has not been as pleasant as we would like it to be. The boarder market indices Nifty Midcap 100 and Nifty Smallcap 100 have taken a major beating this year. These indices have fallen by 13% and 21%, respectively in the last six months.

The downfall has led to a dip in the returns of the equity funds which are focused on this space. Many market experts believe that the fall in the prices of the mid-cap and small-cap stocks are primarily due to the stretched valuations of the mid-cap and small-cap stocks which have seen a sharp run-up in the year of 2017. Further, factors like re-categorisation of mutual fund schemes, issue of the companies being placed under additional and graded surveillance measure (ASM) by SEBI has tempered the returns from this space.

Despite all these factors, if we see the performance of the mutual fund schemes from the mid-cap and small-cap category, the results are mind-blowing.  Even with the steep correction the mid-cap and small-cap schemes have sustained and have beaten the benchmark indices. Out of 21 mid-cap schemes, 19 schemes have outperformed the Nifty Midcap 100. That means 90 per cent of the schemes have outperformed the benchmark index.

On the other hand, small-cap schemes which have been the key wealth creators in 2017 have also managed to outperform the benchmark. Out of 13 schemes, 12 schemes have beaten the Nifty Smallcap 100. However, the presence of positive returns was missing in both the categories.

The only scheme which has offered positive returns during the last six-months was from the mid-cap category. Axis Midcap Fund has stood tall in the returns chart by offering a positive return of 4.6 per cent in this critical situation. With the all above analysis, we can still say that mid-cap and small-cap schemes are still having the potential to provide returns in the longer run. The correction will continue for a few more months, but still, these funds form a great option to stay invested.