Quant Small Cap Fund bet big on 2 pharma stocks last month

Summary: Once a chronic underperformer, this small-cap fund has transformed into a top-ranked wealth creator, compounding at over 25 per cent annually in the last seven years. Its bold, momentum-driven approach means the portfolio never sits still, and last month, it made a decisive pivot into two pharma plays while cutting exposure to several others.

Quant’s small-cap fund wasn’t always the market darling it is today. Between September 2013 and September 2018, when it was managed by Escorts Asset Management, the fund delivered a rather uninspiring 7-odd per cent annualised return, dramatically lagging the small-cap index’s 27.7 per cent annualised returns.

But since September 2018, after Quant took over the small-cap fund from Escorts, the fund has staged one of the most dramatic turnarounds in the small-cap space, climbing to the No. 1 position on the performance rankings, with 25.2 per cent annualised returns, far ahead of the small-cap index’s (Nifty Smallcap 250 TRI) 16.3 per cent. No wonder the small-cap fund has grown over 300 times in size since 2020, currently handling nearly Rs 29,000 crore of net assets.

That performance has, of course, gone unnoticed. Even though the fund has delivered negative returns since June 2024, interest in the scheme remains high.

VLRT in action

So, what has made this fund tick in the last seven years?

Quant follows what it calls the VLRT framework, a largely momentum-based approach to stock-picking:

• Valuation: Is the stock cheap or expensive relative to its fundamentals?
• Liquidity: How much institutional money is flowing into or out of the stock?
• Risk appetite: What does investor positioning tell us about market sentiment
• Timing: Are we entering and exiting positions at the right price levels?

Unlike many funds that take a buy-and-hold approach, the Quant fund house is more dynamic and tactical. This active style means higher turnover, but it has worked well in a market that has rewarded speed and conviction.

What Quant Small Cap Fund bought in August

It opened a new position in Suven Life Sciences, buying 47 lakh shares in August.

It also increased its stake in key pharma and healthcare names, such as Gland Pharma, where holdings more than doubled, and Aster DM Healthcare.

What they sold

Quant also pared exposure to several holdings, staying true to its trademark churn-heavy strategy.

The most notable cut was in Aditya Birla Fashion and Retail.

It also made partial trims across multiple positions, including Anupam Rasayan, Bikaji Foods, HP Adhesives, India Finance Shelter Corp, Onesource Specialty Pharma and Taj GVK Hotels & Resorts.

Complete exits

The fund also made a clean exit from PG Electroplast and Siemens Energy India, booking out entirely.

Our take

At Value Research, we continue to rate the fund four stars, recognising its stellar track record but also acknowledging the risks that come with its style.

For those considering adding it to their portfolio, remember that this is a satellite holding, not the core of your portfolio. Combine it with diversified equity funds, such as flexi-cap funds, to balance risk.

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Also read: Quant Small Cap just bought 5 new stocks. Do you own any?