Emkay bets Rs 1,000 cr on small and mid-caps with New Growth Engine Fund

Business Standard

04-06-2025

Emkay Investment Managers on Wednesday launched the Emkay SMID Cap Growth Engine Fund, a portfolio that underscores growing investor appetite for India's small and mid-cap space, aiming to capture the next phase of India's economic expansion.
Targeting a corpus of Rs 500–Rs 1,000 crore, the fund is being offered in both AIF and PMS formats, and is designed for investors seeking high-conviction exposure to small and mid-cap companies expected to drive the country's future growth story.
So, what's the pitch? Why SMIDs now?
EIML's new fund is based on a simple idea: India's growth story is no longer just about the giants. Smaller and mid-sized companies — especially those driven by innovation, digital expansion, capex, and consumption — are becoming the real engines of future wealth creation.
And here's the kicker: SMID stocks have already delivered strong returns over the past 5 years, but EIML believes that the next 3-5 years could be even better, thanks to:
Easing inflation
Falling interest rates (which helps smaller businesses that rely on borrowing)
Improving household incomes
Supportive liquidity conditions
Strong backing from FIIs and domestic mutual funds
What makes this fund different?
Name: Emkay SMID Cap Growth Engine Fund
Structure: Available both as AIF (Alternative Investment Fund) and PMS (Portfolio Management Services)
Target Corpus: ₹500–₹1,000 crore
Strategy: Invests in listed small and mid-cap stocks using bottom-up stock picking
Research Framework: The unique E-Qual Framework that scores companies on business strength and management quality
Benchmark: S&P BSE 500 TRI
Recommended Horizon: 2–3 years
Fund Managers: Market veterans Manish Sonthalia and Kashyap Javeri
Investment Objective: The product seeks to achieve long-term capital appreciation by investing primarily in small cap & mid cap securities.
Description of types of Securities: Under this PMS and AIF product investments are made in equities and equity related instruments. A balanced and well-diversified equity portfolio is created based on fundamental research.
Investment Approach: The strategy follows a bottom-up stock picking process
"Small & Mid Cap (SMID) offers broader exposure to India's growth story through innovation, digitalisation, capex, and consumption, providing more opportunities for alpha generation compared to large caps. These sectors are likely to benefit from macro tailwinds such as easing inflation, declining interest rates, rising household income boosting consumption, and liquidity measures supporting market revival translating into higher growth. Given that SMID companies tend to rely more on borrowing for their operations and growth, their higher sensitivity to interest rate cycles positions them to revive and potentially outperform in an environment of easing retail inflation and declining rates," said the company in a statement.
According to EIML, mid and small-cap companies are anticipated for positive growth over next 3-5 years, making them a good potential bet for investing. EIML also highlights that mid and small-cap stocks have delivered a robust return over the past five years. It further notes that the current macroeconomic conditions and supportive valuations present an attractive entry point for SMID investments, particularly following the recent market correction.
Who is this fund ideal for?
If you're an investor who:
Is looking for higher alpha than large-cap funds
Can tolerate moderate to high volatility
Has a 2–3 year investment horizon
Wants to diversify beyond blue-chip stocks
Believes in India's structural growth potential
— then this fund might be a smart addition to your portfolio.
"As of March 2025, small-cap and mid-cap mutual funds (MFs) together constitute over 30% of total equity flows, a significant jump from 5% a year ago. The dual support from foreign institutional investors (FIIs) and mutual funds makes this rally much more sustainable. Strengthening flows into SMID segments suggest that select opportunities in small and mid-cap stocks could outperform over the medium term," said Manish Sonthalia, Director &; Chief Investment Officer, Emkay Investment Managers Limited.
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