5 Under-the-Radar Stocks Shared by India's Top Smallcap Funds

While the broader market faces volatility, India's largest smallcap mutual fund managers are showing surprising consensus on a select group of stocks. A deep dive into the portfolios of the country's top three smallcap schemes reveals a concentrated bet on five specific companies.

The Power Trio: Nippon, HDFC, and SBI Small Cap

Data from ACE MF highlights a significant convergence among India’s heavyweight smallcap players. The three largest schemes—Nippon India Small Cap Fund (₹74,600 crore AUM), HDFC Small Cap Fund (₹38,800 crore AUM), and SBI Small Cap Fund (₹37,400 crore AUM)—collectively manage a massive ₹1.51 lakh crore.

These three funds have parked approximately ₹8,000 crore, representing 5.34% of their combined assets, into just five specific stocks. While Nippon India shows a more cautious exposure of 2.49%, SBI Small Cap displays the highest conviction, with nearly 10% of its entire portfolio riding on these five names.

Breaking Down the Five Common Bets

The shared conviction is centered on five companies that span different sectors, providing a diversified approach to smallcap investing.

  1. Krishna Institute of Medical Sciences (KIMS): This is the largest common bet by value. The three funds collectively hold ₹2,170 crore in KIMS. SBI Small Cap leads the charge with a 2.50% stake (₹935 crore).
  2. Kalpataru Projects International: Ranking second, the combined holding in Kalpataru stands at ₹2,100 crore. SBI Small Cap shows its strongest conviction here, allocating 2.76% of its corpus (₹1,030 crore) to the stock.
  3. City Union Bank: The funds have a combined exposure of ₹1,777 crore in this banking entity.
  4. PVR Inox: This entertainment major sees a combined investment of approximately ₹1,000 crore.
  5. Carborundum Universal: Rounding off the list, the three funds hold roughly ₹990 crore in this company.

Market Sentiment: Resilience Amidst Correction

The move toward these stocks comes as fund managers become more constructive following recent market corrections. Recent earnings data suggests that mid-caps delivered a robust 36% YoY profit growth, outperforming both small-caps (23%) and large-caps (10%).

Brokerages like Monarch Networth Capital remain bullish, suggesting that the "time and value correction" in the SMID (Small and Midcap) space over the last 18 months has made bottom-up stock picking highly attractive. This is reflected in the performance of the Nifty Smallcap 100, which has gained 4.3% in CY26, even as the Nifty 50 has seen a decline of over 8%.

A Note of Valuation Caution

Despite the optimism, some analysts urge caution. JM Financial points out that while large-caps trade near their historical means, mid-caps and small-caps are trading at higher multiples. On an estimated FY27 P/E basis, the Nifty Midcap 100 stands at 26.8x, followed by the Nifty Smallcap 100 at 24.5x, making the Nifty 50 (18.8x) the most attractively priced segment.

Key Takeaways