The froth in the small and midcap (SMID) space is limited to a few pockets, but regulatory scrutiny could lead to sustained volatility, observe India s top-drawer wealth managers.
They add that they have been advising clients to reduce their exposure to smallcaps.
Anand Rathi Wealth, which manages investor wealth through mutual funds (MFs), reports that its exposure to smallcap stocks, both through MFs and directly, has decreased by nearly 7 percentage points in the past few months, now standing at 23 per cent.
Some experts feel this trend will be short-lived, others feel this will continue for the next year or two, as elections in India and global tensions impact both these asset classes.
AMFI data showed that of the Rs 80,276 crore of net inflows that equity mutual funds received in this period, about 67% - equivalent to Rs 54,006 crore - went into such schemes. Of this, Rs 26,544 crore was garnered by small cap funds, while Rs 13,280 crore went to mid cap funds and Rs 14,182 crore to thematic /sectoral funds.
"The current inclusion of India into the JPMorgan bond index is likely to put a cap on yields in the medium to short term and will also ease out once we start receiving inflows. Softening in government bond yields across tenures could lead to a downward shift in Indias yield curve, aided by expectations of a shallow rate cut of 50-75 bps starting from Q2 FY25."