The biggest losers so far in the small-cap and mid-cap equity funds list include Sundaram Value Fund Series I, HSBC Midcap Equity Fund, Birla Sun Life Emerging Leaders Fund - Series 6, among others
The long-term benefits of government’s demonetization drive launched on November 8 may not be visible yet, but mutual fund investors in small-cap and mid-cap funds have already lost up to 12% since the move’s rollout. Unless there have been solid supporting inflows, wealth estimated at Rs 9000 crore has evaporated from 110 small- cap and mid-cap funds this month.
The biggest losers so far in the small-cap and mid-cap equity funds list include Sundaram Value Fund Series I, HSBC Midcap Equity Fund, Birla Sun Life Emerging Leaders Fund - Series 6, among others. Even the smallest losers are down 5-7%.
PVK Mohan, head – equity, Principal Pnb Asset Management Company said, “We could see further correction in the market due to global risk-off trade and in India due to demonetization. Nevertheless, we believe investors could buy small cap funds with a 3-5 year view so that they can ride through periods of volatility and also capture the full cycle of growth once the headwinds from demonetization recede.”
Post US elections, interest rates have moved up in US. “India too has faced impact of the same as has been seen in FII outflows of over $ 2 billion in equities in the last few days and the rupee too has depreciated. So, part of the market correction could be attributed to the global factors. The other part of correction could be explained by demonetization as it has had a short term impact on business across sectors,” Karthikraj Lakshmanan, senior fund manager – Equities, BNP Paribas Mutual Fund told DNA Money.
The faster infusion of new currency in the system over next month or so could bring back part of the lost demand in next few months. However, further delay than expected in new currency rollout may have negative impact for longer, he cautions.
Small-cap funds and mid-cap funds were sitting on pretty hefty gains, till November arrived, when demonetization struck.
Saravana Kumar, chief investment officer, LIC Mutual Fund, says,” What we are observing in the market is panic, run for cover, flight to safety as participants are not sure about the impact of this whole move.”
Higher price/earnings ratios ascribed to midcap indices were testimony to high growth expectations from the underlying companies which are now being tested for unreasonableness, Kumar said.
LOOMING LOSS
- The biggest losers so far in the small-cap and mid-cap equity funds list include Sundaram Value Fund Series I, HSBC Midcap Equity Fund, Birla Sun Life Emerging Leaders Fund - Series 6, among others
- The faster infusion of new currency in the system over next month or so could bring back part of the lost demand in next few months
- However, further delay than expected in new currency rollout may have negative impact for longer
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