Small-cap funds: Existing investors should rebalance, continue SIPs

New investors planning large lump-sum investments should stagger them over 6-12 months

Investors have pulled Rs 3,607 crore out of large-cap funds while pouring Rs 26,305 crore into smallcap funds in 2023.

The primary driver behind these flows is returns. While largecap funds have given a return of 11.97 per cent year-to-date (YTD), smallcap funds have given 26.38 per cent. The question is, should investors allocate large sums to a more volatile category while pulling out money from their more stable counterparts?

High earnings growth expectations

The smallcap indices had given negative returns in 2022.

“Valuations had become depressed. As earnings caught up, a rally commenced,” says Vidya Bala, co-founder, Primeinvestor.

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