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

India’s largest smallcap mutual funds are showing a rare consensus, converging on a select group of five stocks despite varying investment strategies. As market volatility persists, these high-conviction picks suggest a strategic shift among fund managers toward specific growth drivers in the small-cap segment.

The Power of Convergence: Rs 8,000 Crore Shared Bet

Data from ACE MF reveals a striking trend across three of India’s most significant smallcap schemes: Nippon India Small Cap Fund (Rs 74,600 crore AUM), HDFC Small Cap Fund (Rs 38,800 crore AUM), and SBI Small Cap Fund (Rs 37,400 crore AUM). Together, these funds manage a massive Rs 1.51 lakh crore.

Interestingly, these three giants have collectively parked approximately Rs 8,000 crore—about 5.34% of their pooled assets—into just five specific companies. While Nippon India maintains a modest 2.49% exposure to this group, SBI Small Cap shows the highest conviction, with nearly 10% of its entire portfolio riding on these five names.

Analyzing the Top 5 Common Holdings

The shared portfolio is comprised of diverse players across healthcare, infrastructure, banking, and entertainment. Here is how the capital is distributed:

Market Sentiment: Growth vs. Valuation Concerns

The move toward these stocks comes as fund managers turn more constructive following a period of correction. George Heber Joseph, CIO and CEO–Equity at ASK Investment Managers, noted that mid-caps recently delivered 36% YoY profit growth, significantly outperforming large-caps at 10%.

However, the optimism is met with a note of caution regarding valuations. While the Nifty Smallcap 100 has outperformed the Nifty 50 so far this calendar year, JM Financial warns that small-cap indices are trading at one standard deviation or more above their historical means. On an estimated FY27 P/E basis, the Nifty Smallcap 100 stands at 24.5x, making it more expensive than the Nifty 50, which trades at 18.8x.

Key Takeaways