Despite experiencing significant volatility in recent weeks, the long-term structural story for smallcap stocks in India remains firmly intact, according to Viraj Gandhi, CEO of SAMCO Mutual Fund. In an exclusive conversation with LiveMint, Gandhi emphasized that while regulatory caution from SEBI has created short-term jitters, the fundamental opportunity in smallcaps continues to be compelling for patient investors.
Regulatory Measures Strengthen Smallcap Ecosystem
Gandhi acknowledged that SEBI's recent oversight measures, including stress-testing requirements, liquidity disclosures, and concentration checks, have caused some market nervousness. However, he views these regulatory interventions as ultimately healthy for the ecosystem. These measures enhance transparency, improve market resilience, and protect investors during sharp market movements, creating a more sustainable environment for long-term growth.
Investor sentiment toward smallcaps remains constructive despite the volatility, Gandhi noted. Market participants continue to see smallcaps as long-term, high-alpha generators that provide access to niche sectors unavailable in large- or mid-cap segments. This perception has supported sustained inflows into smallcap mutual funds even during turbulent periods.
India's First Momentum-Based Smallcap Fund
SAMCO Mutual Fund's timing for launching its new smallcap fund appears strategic. The SAMCO Small Cap Fund is positioned as India's first momentum-based smallcap strategy, distinguishing it from existing funds that typically rely on Quality, Value, Growth, or blended investment styles.
Gandhi provided compelling data to support the momentum approach, revealing that the Nifty Smallcap250 Momentum Quality 100 Index has outperformed the Nifty Smallcap 250 TRI by nearly 6 percent CAGR over 20 years. This performance effectively tripled wealth compared to the benchmark, demonstrating momentum's power as a consistent alpha generator.
The current market environment presents an attractive entry point for momentum strategies, according to Gandhi. Momentum-oriented indices have corrected meaningfully over the past year, creating a healthier setup than during last year's euphoric phase. For investors building a minimum five-year smallcap allocation, adding a momentum sleeve through the SAMCO Small Cap Fund offers a differentiated, evidence-backed edge.
Market Outlook and Investment Advice
Looking ahead to 2026, Gandhi sees India entering with a supportive macro backdrop. Growth-focused government measures, recent GST adjustments, and a more dovish stance from the RBI are creating room for easier financial conditions. Corporate earnings remain strong, with festive-season demand, healthier margins, and an improving earnings-to-GDP ratio indicating continued strength.
However, Gandhi also cautioned about potential challenges that could lead to a weaker 2026. Global factors such as renewed inflation pressures, delayed rate cuts by major central banks, or geopolitical flare-ups could disrupt commodity prices and capital flows. Domestically, certain segments trading at stretched valuations remain vulnerable to earnings disappointments.
For new investors, Gandhi offered straightforward advice: Avoid chasing recent returns or hot themes, as markets can change far faster than expectations. He emphasized setting realistic goals, understanding that returns come in cycles, and focusing on disciplined investing with proper asset allocation. Most importantly, he stressed that patience and consistency matter far more than timing in the long run.
The interview concluded with Gandhi reiterating his confidence in smallcaps' long-term potential, particularly after the recent valuation reset that has created a healthier environment for sustainable growth.
