Despite the underperformance of the equity mutual fund space, small-cap funds have done well in May, outperforming large- and mid-cap peers. Investors who are underweight on small-caps are advised to rebalance their portfolios by investing in them. Small-cap funds have received better inflows compared to mid-cap funds in the last two months, while large-cap funds have recorded net outflows of ₹1,362.28 crore ($184 million) in May. The current traction towards small-cap funds is due to attractive valuations in these stocks after their underperformance, according to Alekh Yadav, Head of Investment Products & Solutions at Sanctum Wealth.
