India's three largest smallcap mutual funds have demonstrated remarkable consensus by holding five under-the-radar stocks across their portfolios. According to reports from The Economic Times, Nippon India Small Cap Fund leads with assets of ₹74,600 crore, followed by HDFC Small Cap Fund at ₹38,800 crore and SBI Small Cap Fund at ₹37,400 crore - collectively managing ₹1.51 lakh crore of investor money. These funds have collectively invested approximately ₹8,000 crore or 5.34% of their combined assets in just these five names: Kalpataru Projects International, Krishna Institute of Medical Sciences (KIMS), City Union Bank, PVR Inox, and Carborundum Universal.
As reported by The Economic Times, SBI Small Cap Fund demonstrates the strongest conviction with nearly 10% of its entire portfolio invested in these five stocks alone. The fund holds ₹935 crore worth of KIMS shares (2.50% of its corpus), ₹1,030 crore in Kalpataru Projects International (2.76%), and ₹1,000 crore in City Union Bank. In contrast, HDFC Small Cap Fund allocates ₹845 crore to KIMS (2.18%) and ₹605 crore to Kalpataru Projects International (1.56%), while Nippon India Small Cap Fund maintains more modest positions with ₹389 crore in KIMS (0.52%) and ₹473 crore in Kalpataru Projects International (0.63%).
According to The Economic Times, the optimism around small and midcap stocks is supported by strong earnings performance, with mid-caps delivering 36% YoY profit growth versus 23% for small-caps and 10% for large-caps during the recent earnings season. The Nifty Smallcap 100 has gained 4.3% in CY26, outperforming the Nifty 50's decline of more than 8% over the same period. However, valuation concerns persist as JM Financial reports that midcap and smallcap indices are trading at one standard deviation or more above the mean, with midcaps at 26.8 times and smallcaps at 24.5 times on FY27 estimated P/E ratios.
As reported by The Economic Times, fund managers are increasingly constructive on small and midcap segments following a prolonged correction. George Heber Joseph, CIO and CEO–Equity at ASK Investment Managers, noted that the firm has selectively increased exposure to small and midcap space over the last two months, believing investors with long-term horizons should use volatile times to accumulate domestic equities. Flow data for May shows mutual funds were net buyers in 56% of stocks, with the sharpest increases in Tata Technologies, Pine Labs, Indraprastha Gas, JSW Cement, and Manappuram Finance. Despite the positive sentiment, some brokerages remain cautious, with JM Financial noting that large-cap indices are trading only slightly above historical mean while midcap and smallcap indices are significantly above their means.
