Time to worry or an aberration? Small cap funds outflow hits Rs. 94-cr mark, AMFI data shows

Mutual fund industry has seen small cap funds outflow hit Rs. 94-cr level.

In what is being seen as a matter of concern, but also an aberration, small cap funds have seen outflows for the first time in 30 months, Association of Mutual Funds in India (AMFI) data shows. However, while the outflows are concerning, this is not seen as more than a blip and some analysts have dubbed it an “aberration”.

SEBI's Cautionary Remark Triggers Changes

AMFI data shows outflows in small caps have happened for the first time in 30 months.(iStock)

Notably, AMFI's recent data reveals a major shift in mutual fund inflows and the segment affected in particular was small cap funds. Notably, small-cap funds saw net outflows of Rs. 94.17 crore. Such a large number must have had some reasons behind it? Especially if you see that large funds witnessed an inflow of Rs. 2127.79 crore, while mid-cap funds ingested Rs. 1017.79 crore during March 2024.

Regulatory Caution: SEBI's Warning Raises Concerns and Influences Investors

Madhabi Puri Buch, SEBI Chairperson had expressed concerns about overvaluation of small and mid-cap stocks earlier. Market manipulation and formation of market bubble too were highlighted, making investors sit up and take notice, draw lessons and also act. The subsequent revaluation of investment strategies had the result of small caps suffering outflows. In fact, the market concerns ensured noticeable restrictions on fresh inflows.

“There are pockets of froth in the market. Some people call it a bubble, some may call it froth,” Economic Times quoted Buch as saying. She added, “It may not be appropriate to allow that froth to keep building.”

Where do things stand for investors looking to invest?

Taking a strong stand was DP Singh, deputy MD & joint CEO at SBI MF, who said, “It’s an aberration.” He added, “Even the quantum of outflow is pretty insignificant."

Pointing that way is the fact that small caps and mid caps are outperforming large caps in April. The data that backs up the claim is that Nifty 50 gained 1.3% so far this month, Nifty Midcap 150 and Nifty Smallcap 250 gained 2.9%, and 4.2%, Mint reported today.