''Come to small caps with long-term view''

Nippon India Small Cap Fund has defied all conventional wisdom around size constraints, specially in the small-cap space. This fund is the daddy of the small-cap category, not just in terms of its asset size but also in terms of its performance consistency. It has been our 'Buy' recommendation, and it continues to be firmly placed there despite its big size. In a candid conversation with Samir Rachh, who has been navigating the small-cap space for several years now, we unlock all the secrets of the success of this fund. Excerpts from the conversation Your small-cap fund has done exceedingly well over the years. But talking specifically about the near term, small-cap stocks have outperformed the stocks of bigger companies by a considerable margin in the last 3-5 months. Even though your small-cap fund has a higher allocation to large caps than its peers, it has beaten them. What has contributed to your fund's impressive performance despite the headwinds of market-cap orientation and size? We follow the bottom-up approach to investing. We try to hold stocks for a longer period. Some of our individual stocks, including some large-cap stocks, have done well, and that has contributed to the performance. The conventional approach to small-cap investing would point towards a relatively more focused portfolio of bottom-up stock ideas curated by the fund manager with deep research and conviction. Such a strategy would naturally hit size constraints simply for the lack of stock ideas beyond a point. How do you put that in perspective in the context of your small-cap fund, which, on the surface, runs contrary to this idea because of its sheer size? For instance, roughly what percentage of the fund's portfolio comprises genuine bottom-up stock picks versus t

This article was originally published on July 31, 2023.