Popular sectors in which small-cap funds invest. Does your fund have the exposure?

Certain sectors have yielded good returns and are a favorite of small-cap fund managers. Check what these sectors are and whether your small-cap fund invests in them.

Small-cap mutual funds
  • Small-cap mutual funds invest in small-cap companies and have the potential to generate attractive returns for investors.
  • While small-cap funds have a diversified portfolio, some sectors are quite popular among most schemes.
  • Some popular sectors include construction, chemicals, pharmaceuticals, IT software, etc. 
  • Choose small-cap schemes that have exposure to these popular sectors for good returns

Small-cap mutual funds invest in up-and-coming companies which have the potential to grow and deliver attractive returns in a positive market. Usually, fund managers prefer the bottom-up approach when allocating the fund’s portfolio into different avenues. 

However, when you tally the portfolio composition of small-cap mutual funds, some sectors emerge as favorites. Most fund managers invest in the leading companies in these sectors to generate attractive returns for investors. 

Here’s a lowdown on some of the leading sectors preferred by small-cap mutual funds and the top three companies in each sector which dominate the portfolio – 

Mutual funds with major exposure in the sectorMutual funds with major exposure in the sector

Also Read - Find out which small and midcap stocks are winning big in thematic and sectoral funds

The ten sectors above are preferred for their growth potential. Leading mutual fund schemes invest in these sectors for good returns.

If you own a small-cap scheme, check which sectors are in your portfolio. Assess the companies in each sector to ensure that the most profitable companies are in your basket. Alternatively, if you are looking to invest in a small-cap scheme, pick a mutual fund with exposure in these sectors to get a winning portfolio.

Also Read - Whether you should invest in small-cap funds and how does Quant Small Cap Fund rank

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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