Small-cap equity funds have delivered impressive returns in the past year, prompting investor interest. However, these funds come with inherent risks, especially in challenging economic conditions. To address valuation risks, investors can consider funds with limited exposure to small caps and maintain a long investment horizon. Despite the volatility, small-cap funds offer growth opportunities, particularly in sectors such as cables, logistics, and auto ancillaries. Fund managers highlight the potential for continued earnings growth driven by stable economic conditions and favorable demand-supply dynamics. Investors seek small-cap schemes for the possibility of generating alpha, especially during cyclical upturns.
Mitigating Valuation Risks in Small-Cap Funds: Strategies for Long-Term Investors
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