Nifty Smallcap 250, Nifty Midcap 150 outperform all major indexes in June

Nifty Smallcap 250 and Nifty Midcap 150 outperformed all major indexes clocked gained 6.36% and 6.16%, respectively in June.

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Are there signs of overheating in the small-cap space?

 Some leading mutual funds in the small-cap segment have in the last two months stopped fresh lump sum investment in their schemes, an indication of froth building in this space. According to Motilal Oswal (NS:MOFS) Asset Management Company (MOAMC)'s Global Market Snapshot report, Nifty Smallcap 250 and Nifty Midcap 150 outperformed all major indexes, gaining 6.36 per cent and 6.16 per cent, respectively in June.

The Nifty50 rose 3.53 per cent and Nifty 500 rose 4.21 per cent in the same period. 

As per MOAMC’s report Nifty Smallcap 250 and Nifty 150 rose  19.99% and 18.05% respectively in the first quarter of fiscal 2024.  The NIFTY 50 reached a new milestone, surging past the 19,000-level to set a fresh all-time high surpassing its previous peak in December 2022.

In June, there was a significant increase in investments in small-cap mutual funds due to the benchmark indices crossing record highs. The latest data from AMFI shows that small-cap equity schemes received a record high of Rs 5,472 crore in June 2023. This is the third consecutive month with the highest inflows into small-cap funds.

Notably, the realty sector continued its aggressive upward movement and rose 9% conversely in June 2023, the IT sector remained relatively flat, while the Healthcare sector rose 9%.

Return contribution by Sector – Nifty 500 Index (Jun-23) ( Source Motilal Oswal) 

Source/Disclaimer: MOAMC. Data as of 30-Jun-23. Return contribution by sector calculated on the basis of monthly index portfolio

All sectors made a positive contribution to the NIFTY 500 returns, with the financial services sector making the most significant impact on the overall returns.