Domestic equity mutual funds have experienced significant declines over the last five months, reflecting the downturn in equity markets. Factors such as persistent selling by Foreign Institutional Investors (FIIs), escalating geopolitical tensions, market valuations, and weak corporate earnings have created an atmosphere of uncertainty. Consequently, there has been a broad-based correction in equity mutual fund schemes, with some falling by as much as 30 percent from their peak on September 26, 2024.
Mutual fund schemes that employed aggressive investment strategies like momentum investing and high-conviction bets were especially impacted. Among equity categories, small-cap funds took the biggest hit. For instance, large-cap, mid-cap, and flexi-cap funds recorded returns of -16 percent, -19 percent, and -17 percent, respectively, over the past five months, whereas small-cap funds saw a steeper decline of -20 percent.
Investors have been gravitating towards safer stocks, leading to reduced demand for riskier small-cap stocks. The sell-off has been fueled by stretched valuations and profit-booking.
While nearly all the stocks in their portfolios have suffered significant losses during this period, a few stocks have shown resilience and managed to deliver positive returns over the last five months. Below is a list of such stocks held by small-cap funds that have defied the trend and posted gains during this challenging phase.
The original article was published on March 11, 2025.
