At a time when Indian smallcaps are struggling for direction, one fund has quietly outperformed 93% of its peers by doing the exact opposite of the crowd.
The Bandhan Small Cap Fund, which manages $2.1 billion (~₹17,500 crore), is now aggressively accumulating beaten-down internet and digital platform stocks like Paytm, Info Edge, and IndiaMART, betting that extreme pessimism is creating deep-value opportunities in India’s tech ecosystem.
This bold strategy comes even as the Nifty Smallcap 100 index remains under pressure, down ~2.7% YTD, reflecting broader risk aversion across mid- & small-cap segments.
What Exactly Is The Fund Buying?
According to disclosures and interviews, the fund has added sizeable exposure to:
| Stock | Theme | Why It Matters |
|---|---|---|
| Paytm (One97) | Fintech turnaround | Improving profitability and BNPL optionality |
| Info Edge | Digital platforms | Valuation reset + Zomato, policybazaar exposure |
| IndiaMART | B2B e-commerce | Market leadership + operating leverage |
The fund added ~1.6 million Paytm shares in January, signalling high conviction despite regulatory and earnings uncertainty.
Fund Manager’s Core Thesis—Deep Value + High Asymmetry
Manish Gunwani, CIO (Equities) at Bandhan AMC, sums up the strategy:
“We are comfortable buying unpopular value stocks as long as there is probability for them to double.”
Translation for traders:
The fund is hunting asymmetric risk-reward setups in stocks where bad news is priced in, but future optionality is not.
This contrarian accumulation phase typically appears near medium-term bottoms, especially in:
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beaten-down tech
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regulatory-stressed fintech
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cyclically weak sectors
Market Context: Why This Move Is Contrarian
| Index | 2026 YTD Performance |
|---|---|
| Nifty 50 | ~Flat to slightly positive |
| Nifty Smallcap 100 | –2.7% |
| MSCI Asia-Pac | +11% |
Despite global equity strength, Indian smallcaps remain under pressure, creating valuation pockets rarely seen outside corrections.
Sector Rotation Signals Emerging
Beyond internet stocks, the fund is overweight in:
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Financial Services
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Real Estate
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Textiles
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Renewables
It has also trimmed metal exposure, suggesting a clear macro rotation bet.
A custom textile basket has already rallied 15%+ after India-US trade deal news, validating the fund’s early positioning.
Why This Matters Today (Trader + Investor Angle)
This move sends three high-signal market messages:
1. Smart Money Is Buying Fear
When top-quartile funds buy stocks hated by the market, it often marks accumulation zones, not distribution.
2. Internet Stocks Are Entering Deep-Value Phase
After brutal corrections, fintech and digital platform stocks are shifting from momentum to value plays.
3. Smallcap Rotation May Be Building
Persistent institutional accumulation often precedes sector-level trend reversals, especially after prolonged underperformance.
Tactical Market Insight—How Traders Can Use This
| Strategy | How To Apply |
|---|---|
| Swing Traders | Track Paytm + Info Edge breakout levels for positional trades |
| Positional Traders | Look for base breakouts in quality internet and textile names |
| Long-Term Investors | Use staggered SIP/phased entries instead of lump sum |
Key Risks To Watch
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Regulatory surprises (especially fintech)
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Earnings volatility in platform businesses
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Broader risk-off sentiment in global markets
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Smallcap liquidity crunch during corrections
FAQ
Q1. Why is this fund buying Paytm despite weak stock performance?
Because profitability trends are improving and regulatory overhang is easing, creating deep-value opportunity.
Q2. Is this strategy risky?
Yes. Deep-value strategies involve volatility but offer high reward asymmetry when timing aligns.
Q3. Does this signal a turnaround in internet stocks?
Early institutional accumulation often precedes sector recoveries, but confirmation requires price breakout.
Q4. Should retail investors copy this strategy?
Retail investors should use SIP and staggered buying, not aggressive lump-sum entries.
