Fund Manager Talk: Inflows into small and midcaps ahead of earnings, says Ashish Naik of Axis Mutual Fund

economictimes.indiatimes.com:

Market flows into smallcaps and midcaps have been ahead of their earnings due to increased investor appetite for these funds, says Ashish Naik, Equity Fund Manager, Axis Mutual Fund. “I would like to mention here that the small caps and midcaps have seen notable earnings upgrades and some of it is already reflected in their valuations,” he says. Edited excerpts from a chat:

Equity MF flows dropped in March and smallcap funds finally saw a trend reversal. Would you call this an aberration?

Smallcap funds experienced outflows for the first time in two and a half years primarily due to the regulatory concerns raised by Sebi on small and midcap stocks and directing mutual funds to run stress tests on their small and midcap fund portfolios in March. Additionally, March often sees higher outflows on account of financial year end and advance tax. I believe this as an aberration and expect inflows to resume.

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Stepping into FY25, do you think the overall market returns will moderate or do you continue to see double-digit returns?

India’s economic landscape is strong, presenting promising growth opportunities compared to other economies. This optimism is mirrored in the benchmark indices reaching unprecedented highs, leading to relatively high valuations compared to other