Bandhan Small Cap Fund Outperforms 93% Peers, Bets on Internet Value Stocks

Introduction

Bandhan Small Cap Fund has outperformed 93% of its peers, according to recent industry data.

The $2.1 billion fund has shifted focus toward internet and digital platform companies.

Recent additions include Paytm, Info Edge India Ltd., and IndiaMART InterMesh Ltd.

This move signals a strategic tilt toward value opportunities within the internet sector.

Strong Relative Performance

Outperforming 93% of peers is not incidental. It reflects disciplined portfolio construction and sector timing.

Key factors behind performance:

Focus on scalable small-cap businesses

Tactical allocation shifts

Strong stock selection within niche industries

Active management in volatile segments

Small-cap funds require precision. The margin for error is low.

Strategic Allocation to Internet Value Stocks

The fund has recently added exposure to:

Paytm

Info Edge India Ltd.

IndiaMART InterMesh Ltd.

These companies operate in digital platforms, recruitment tech, fintech, and B2B commerce.

The allocation suggests a belief that:

Internet stocks are trading below intrinsic value

Earnings visibility is improving

Market pessimism has created entry opportunities

This is a calculated value rotation, not a momentum trade.

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Why Internet Stocks Now?

Internet companies faced sharp corrections over the last few years.

Concerns included:

Profitability timelines

Regulatory risk

Slowing growth post-pandemic

High valuations

However, fundamentals have improved:

Cost rationalization

Positive operating leverage

Stronger cash flows

Clearer monetization models

The fund appears to be positioning ahead of a potential re-rating cycle.

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Risk Profile: Not for Conservative Investors

Small-cap investing remains volatile.

Risks include:

Liquidity constraints

Earnings unpredictability

Market sentiment swings

Sector concentration risk

Adding internet exposure increases beta.

Investors must assess:

Time horizon (minimum 5–7 years preferred)

Risk tolerance

Portfolio diversification

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Portfolio Strategy: Tactical, Not Thematic

This is not a broad technology bet.

It is selective exposure within internet businesses showing:

Balance sheet strength

Scalable models

Improving profitability

Competitive advantages

The strategy aligns with active management, not passive indexing.

What This Means for Investors

For investors, this development indicates:

Fund managers are rotating into beaten-down growth segments

Valuation discipline remains intact

Market cycles are being actively navigated

However, entry timing matters. Small-cap funds can deliver high alpha but also sharp drawdowns.

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Conclusion

Bandhan Small Cap Fund’s outperformance is supported by active allocation and strategic stock picking.

Its recent move toward internet value stocks signals confidence in improving fundamentals.

The opportunity exists, but so does volatility. Investors must align allocation with risk capacity and long-term goals.

FAQ

Q1. What is Bandhan Small Cap Fund’s recent performance?

It has outperformed 93% of its peer small-cap funds based on recent comparative data.

Q2. Why did the fund invest in Paytm, Info Edge, and IndiaMART?

These companies are viewed as value opportunities within the internet sector, with improving fundamentals and scalable models.

Q3. Is investing in small-cap funds risky?

Yes. Small-cap funds carry higher volatility, liquidity risk, and earnings uncertainty compared to large-cap funds.

Q4. Are internet stocks considered value investments now?

Some internet stocks are trading below historical valuations due to prior corrections, creating selective value opportunities.

Q5. Who should consider investing in small-cap funds?

Investors with a long-term horizon, high risk tolerance, and diversified portfolios.

Q6. Does this mean internet stocks will rally soon?

Not necessarily. Fund allocation indicates conviction, but market outcomes depend on earnings delivery and broader sentiment.

Citations

• Bloomberg

• Association of Mutual Funds in India (AMFI)

• SEBI Fund Classification Framework

• Morningstar India

• Company Annual Reports and Investor Presentations