If you are looking for smallcap stock ideas, the portfolio holdings of small-cap funds are a good place to look out for picks.
Such equity mutual funds are mandated to invest in stocks that rank after the first 250 stocks in market capitalisation. Since MFs do their due diligence and research before picking small-cap stocks, a segment where information is sparse, it pays to bet on stock ideas already validated by institutional investors.
Here are details of the most popular smallcap stocks held by the 24 funds in this category.
The two dozen smallcap funds put together have exposure to over 530 securities. But this is at a category level, i.e.roughly 10 per cent of the 4,800 odd stocks listed under this segment.
From a category average perspective, small-cap funds typically hold 5 per cent in largecap stocks, 15 per cent in midcap, 72 per cent in smallcap, and the rest in others/cash etc.
In this study, we found , that the portfolio holdings varied with 44 being the minimum and nearly 150 being the maximum. The low-asset funds in the small-cap space had a lower stock count , whereas the larger ones diversified into many.
Some of the biggest and most well-known small-cap funds include Nippon India Small Cap, SBI Small Cap, HDFC Small Cap, Axis Small Cap, and DSP Small Cap. From a sectoral perspective, the 24 small-cap funds have exposure to as many as 43 sectors.
However, Industrial Products remains dominant with over 11 per cent weight at a fund category level, followed by Consumer Durables (7.5 per cent), Software (6.3 per cent), Chemicals (6 per cent), Construction (5.3 per cent), Consumer Non-Durables (5.1 per cent), Auto Ancillaries (4.7 per cent), Banks (4.6 per cent) and Finance (4.5 per cent).
Most popular stocks in small-cap funds
Using ACEMF data, we scanned the portfolios of all small-cap equity funds and found the most owned stocks in portfolio holding.
Here are those 'popular' stocks:
- Carborundum Universal: This Murguppa group company makes abrasives, ceramics, refractory products, and electro-minerals. The stock is held across 15 small-cap fund portfolios i.e. almost 62 per cent.
- Fine Organic Industries:This chemical company is a leading manufacturer of menthol crystals and natural mint derivatives. The stock is held by 12 small-cap funds, i.e. it is present in every second fund of this category.
- Tube Investments of India: Another Muruguppa group firm, specialises in engineering, bicycles, metal formed products, and chains. The stock is held by 10 small-cap fund portfolios.
- Brigade Enterprises: This is a real estate company and a leading property developer in the South. The stock is held is across 14 small-cap fund portfolios.
- Grindwell Norton: A pionee in grinding wheels manufcaturing since 1940s is controlled by Saint-Gobain. The stock is held across 10 small-cap funds.
- #6-Blue Star: A leading home appliances company, is a manufacturer of air conditioners, air purifiers & water coolers. The stock is held in nine small-cap fund portfolios.
- #7-K.P.R. Mill: This company is said to be one of the largest vertically integrated listed companies with a diversified business focus spanning yarn, fabrics, garments and white crystal sugar. The stock is present in 11 small-cap funds.
- #8-City Union Bank: A private bank headquartered in Kumbakonam, Tamil Nadu. The stock is present in as many as 13 small-cap fund portfolios.
- #9-Cyien: This is an engineering, manufacturing, and digital technology solutions company, formerly called Infotech Enterprises. The stock is held by nine small-cap funds.
- #10-Bajaj Electricals: A consumer electrical equipment manufacturing company, this stock is held by just two small-cap funds i.e. HDFC Small Cap and Nippon India Small Cap.
For those wondering which are the next ten small-cap stocks most owned by funds, don't fret.
This list includes Timken India, KPIT Technologies, Sheela Foam, Navin Fluorine International, Ratnamani Metals & Tubes, KEI Industries, Narayana Hrudayalaya, eClerx Services, Galaxy Surfactants and CCL Products (India). These are compiled by value terms.
On the scheme count, i.e. the number of instances when a stock is present in the 24 small-cap schemes, the top-20 most owned/popular list has some interesting inclusion such as Birlasoft, PNC Infratech, Rolex Rings, V-Mart Retail, KNR Constructions, Multi Commodity Exchange Of India, KEI Industries, Persistent Systems, Can Fin Homes, JB Chemicals & Pharmaceuticals and Balrampur Chini Mills.
Each of these stocks is present in 11-14 small-cap fund portfolios.