Recent months have brought fluctuations in the inflows of small-cap funds. In May 2024, inflows reached approximately ₹2,700 crore, marking a strong interest in these funds. However, this momentum was not sustained, as inflows later declined.

In August, small-cap funds rebounded, with inflows climbing to around ₹3,200 crore.

Nonetheless, a slight dip was observed in September, with inflows settling at ₹3,071 crore.

In contrast, mid-cap funds have demonstrated more consistent growth, especially following July. Inflows for July stood at ₹1,644 crore, which surged significantly to ₹3,054 crore in August.

September saw further stability, with inflows reaching approximately ₹3,130 crore. This upward trajectory indicates that mid-cap funds are gaining traction among investors.

Despite this positive trend, October introduced new challenges.

The Nifty mid-cap index experienced a notable decline of about 6%, while the Nifty small-cap 100 index fell approximately 5.5%. From their respective 52-week highs, the Nifty mid-cap index has dropped by 8.8%, and the Nifty small-cap index by 6.7%.

This downturn primarily occurred in October, raising concerns among investors about potential market corrections.

Year-to-date, both the Nifty mid-cap and small-cap indices have shown resilience, appreciating between 20% and 21%. Specifically, the Nifty mid-cap index is up 20.1%, while the Nifty small-cap index has risen approximately 21%.

These segments were the darlings of the market at the beginning of 2024 and 2023, attracting substantial inflows as investors sought growth opportunities in smaller companies.

However, questions linger regarding the sustainability of these gains.

Market analysts have raised concerns about whether valuations have become stretched and whether alternative investment opportunities may yield better returns.