Domestic equity mutual funds have undergone significant corrections over the past five months, mirroring the broader downturn in equity markets.
Small-cap funds have been particularly affected, suffering the steepest declines among all equity categories. From September 26, 2024, to March 14, 2025, the Nifty Smallcap 250 Total Return Index (TRI) fell by 24 per cent, as against the 14 per cent decline in the benchmark Nifty 50 TRI.
New stocks bought by smallcap funds
Despite this challenging environment, active fund managers view the market correction as a strategic buying opportunity. They appear to be systematically identifying and investing in companies/stocks that have corrected to a level where the entry point could be favourable to them.
These managers are employing a long-term investment approach. Further fund managers are assessed based on performance relative to benchmark and hence would find it difficult to hold cash beyond a certain level. Thus, their investment in these companies could also reflect stocks that they feel maybe relatively better placed as compared to their benchmark index.
Here are the newly added stocks by the top four small cap funds (in terms of the assets managed) over the last three months.