5 Under-the-Radar Stocks Shared by India's Top Smallcap Funds
While the broader market experiences volatility, a specific cohort of stocks has caught the attention of India's most successful smallcap fund managers. Data reveals a striking consensus among the country’s three largest smallcap mutual fund schemes, signaling high conviction in a select group of companies.
The ₹1.51 Lakh Crore Consensus
India’s three heavyweight smallcap schemes—Nippon India Small Cap Fund (₹74,600 crore), HDFC Small Cap Fund (₹38,800 crore), and SBI Small Cap Fund (₹37,400 crore)—collectively manage a massive ₹1.51 lakh crore. Despite their differing investment styles, these three funds have converged on five specific stocks: Kalpataru Projects International, Krishna Institute of Medical Sciences (KIMS), City Union Bank, PVR Inox, and Carborundum Universal.
Together, these three giants have parked approximately ₹8,000 crore, representing 5.34% of their combined pooled assets, into just these five names.
Deep Dive into the Top Common Holdings
The level of conviction varies significantly across the funds, with SBI Small Cap showing the most aggressive positioning. While Nippon India Small Cap has a modest 2.49% exposure to this group, SBI Small Cap has dedicated nearly 10% of its portfolio to these five names.
- Krishna Institute of Medical Sciences (KIMS): This is the largest common bet by value, with a combined holding of ₹2,170 crore. SBI Small Cap leads the charge with a 2.50% allocation (₹935 crore).
- Kalpataru Projects International: Ranking second, the combined holding stands at ₹2,100 crore. SBI Small Cap holds its largest single conviction here at 2.76% (₹1,030 crore).
- City Union Bank: The third most common interest, with a collective exposure of ₹1,777 crore.
- PVR Inox & Carborundum Universal: These round out the list with combined holdings of approximately ₹1,000 crore and ₹990 crore, respectively.
Market Sentiment: Bullishness vs. Valuation Concerns
The convergence of these funds comes at a time when fund managers are turning constructive on the small- and mid-cap (SMID) space following recent corrections. According to George Heber Joseph of ASK Investment Managers, mid-caps recently delivered 36% YoY profit growth, significantly outpacing large-caps at 10%.
However, the optimism is not universal. While the Nifty Smallcap 100 has outperformed the Nifty 50 in the current calendar year, some analysts warn of high valuations. JM Financial points out that mid-cap and small-cap indices are trading at one standard deviation or more above their historical means. On an estimated FY27 P/E basis, the Nifty Midcap 100 trades at 26.8x, while the Nifty Smallcap 100 sits at 24.5x, making large-caps (18.8x) the relatively cheaper option.
Key Takeaways
- High Conviction Convergence: India’s three largest smallcap funds have collectively invested ₹8,000 crore across just five stocks, showing a rare consensus in professional fund management.
- SBI Small Cap Leads Aggression: Among the top funds, SBI Small Cap shows the highest concentration in these common picks, dedicating nearly 10% of its corpus to the group.
- Growth vs. Valuation Tug-of-War: While mid-and-small-cap earnings growth remains robust, analysts caution that these segments are trading at higher valuation multiples compared to large-cap stocks.