Smallcap surge revived: FIIs and Mutual Funds collaborate, eyeing 200 counter picks.

Summary:

Smallcap Stocks Rebound Following SEBIRemarks; FIIs and Mutual Funds Boost Holdings in 213 Counters. Transformers & Rectifiers, Puravankara, and Motilal Oswal Financial among Top Performers amid Valuation Concerns.

"Sebi-Induced March Sell-Off in Smallcap Stocks Proves Fleeting as Indices Return to Record Highs. Despite Valuation Concerns, FIIs and Mutual Funds Increase Stakes in 213 Smallcaps during the Quarter."

Shareholding Pattern Shows FIIs Bullish on 56% of BSE Smallcap Index Stocks Despite Valuation Concerns; Mutual Funds Favor 40% of Counters.

Both FIIs and mutual funds increased their stakes in 213 counters, including Lemon Tree Hotels, Reliance Power, Pricol, Suzlon Energy, SpiceJet, Cochin Shipyard, Olectra Greentech, GRSE, Mastek, and Tejas Networks.

During February and March, amidst profit booking and regulatory worries regarding market froth, 63% of midcap and 70% of Smallcap stocks experienced negative returns. In contrast, two-thirds of large-cap stocks generated positive returns over the same period.

Smallcap champions regained lost ground in April as indices surged to new heights.

Andrew Holland, CEO of Avendus Capital, expressed, "We should persist with our buying approach. The downturn in small and midcaps didn't reflect any substantial change in the economic or outlook scenario. Although valuations may seem stretched, it's not exclusive to small and midcaps; larger companies face similar situations at times. As long as investors are familiar with their chosen companies and investment themes, these periods present favorable opportunities."

He remarked that with a 7% GDP growth and expectations of interest rate reductions later this year, investors stand to gain substantially from investments in small and midcaps.

During the current March quarter earnings season, smallcap enthusiasts are staying active as positive developments are swiftly factored into prices, resulting in rapid surges.

"Presently, it is anticipated that mid and small-cap portfolios will exhibit 7-9% greater earnings growth compared to the Nifty basket in the next two years. This accelerated earnings growth is pivotal for maintaining the elevated valuations of mid and small-caps, which currently command historically high premium levels compared to large caps," stated Harsha Upadhyaya, Chief Investment Officer - Equity, Kotak Mahindra AMC.

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Source - https://economictimes.indiatimes.com/markets/stocks/news/smallcap-boom-is-back-fiis-mutual-funds-team-up-to-shop-at-200-such-counters/articleshow/109612655.cms