Mahindra Manulife Small Cap fund is off to a flyer –delivering a robust 5% alpha over benchmark and peer group average in its first6 months since inception. Attribution analysis suggests stock picks in a host of sectors including industrials, auto and consumer discretionary have contributed to this alpha.
The portfolio has close to 60 stocks with 15 positions at less than 1% each of portfolio – a rather long tail. Abhinav attributes this tothe sharp run up we’ve seen in small caps – which prevented him from accumulating meaningful positions at prices he wanted.
Abhinav likes auto ancillaries that are playing the value migration story to EVs. He believes some of these stocks are far better plays than OEMs as they also have strong export markets to cater to.
Exposures to steel and mining are classic bottom-up picks –they are strong value and domestic growth stories – unrelated to the global slowdown.
Small caps have outperformed smartly in last 3 months. If RBI rate cut cycle kicks in soon, there is possibility for further re-rating as small caps are most sensitive to interest rates.
The fund has 20% exposure to microcaps – Abhinav is confident that liquidity is unlikely to be an issue in the stocks the fund owns.
Two top sectors for Abhinav in the small caps space are auto ancillaries and textiles.