Smallcap funds pare core exposure as valuation worries remain

Allocation to smallcap basket declines from 76.4% a year ago to 74.4%

- ABHISHEK KUMAR

The exposure of smallcap funds dedicated to 'smallcap' stocks has come down over the past one year as the broader market valuations remain elevated. The average allocation to 'smallcaps' for top 10 schemes by size - which stood at 76.4 per cent in October 2024 is down to 74.4 per cent this October.

Smallcap schemes are mandated to invest at least 65 per cent of their corpus in smallcap stocks.

The rest can be invested in largecaps, midcaps and debt instruments.

However, there are some schemes which invest only in smallcap stocks.

The allocation across market cap (mcap) segments is largely driven by the relative attractiveness of each bucket, according to experts.