Smallcap Funds Outperform Index Amidst Downturn, Yet No Positive Returns
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Moneycontrol•23-01-2026, 19:37
Smallcap Funds Outperform Index Amidst Downturn, Yet No Positive Returns
- •90% of smallcap mutual funds outperformed the BSE SmallCap Index, which fell by 21% since December 2024.
- •Despite outperforming the index, not a single smallcap fund delivered positive returns to investors in the last year.
- •Smallcap stocks experienced a significant rally post-COVID, leading to high valuations that outpaced earnings growth.
- •Market experts warn that high valuations persist, with the BSE SmallCap Index P/E around 24 and some funds' portfolio P/E even higher.
- •Financial advisors recommend smallcap investments for aggressive investors with a 5-7 year horizon, suggesting SIP/STP over lump sums.
Why It Matters: Smallcap funds beat the index during a downturn but failed to generate positive returns, highlighting valuation concerns.
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