Small-cap mutual fund managers made substantial adjustments to their portfolios in May 2026, significantly ramping up exposure to industrial products and pharmaceutical sectors. This strategic shift saw diagnostic and healthcare companies like Vijaya Diagnostic Centre and Dr. Lal Path Labs emerge as top beneficiaries, according to a recent analysis of 19 leading fund houses.
Key Investment Trends and Top Buys
The analysis, which tracked buy and sell decisions between April and May, revealed a strong bullish sentiment towards manufacturing, healthcare, and consumer spending-linked sectors. Fund houses executed 771 buy actions in total, including 58 fresh purchases and increased exposure to 263 existing stocks.
- Industrial Products: This sector led with 31 fund actions across 24 stocks, indicating robust confidence in domestic manufacturing.
- Pharmaceuticals & Biotechnology: Closely following, this sector saw 30 fund actions, highlighting sustained interest in healthcare.
- Consumer Durables: Also with 30 fund actions, reflecting optimism in consumer spending.
Leading Stock Accumulations
Among individual stocks, Vijaya Diagnostic Centre topped the list, with five asset management companies (AMCs), including Motilal Oswal, HSBC, HDFC, and Edelweiss, increasing their holdings. Dr. Lal Path Labs and Navin Fluorine International each saw four AMCs raise their exposure. Other companies witnessing increased investment included Computer Age Management Services (CAMS), Safari Industries India, Firstsource Solutions, Krishna Institute of Medical Sciences, Neuland Laboratories, State Bank of India, Timken India, Angel One, Gland Pharma, V-Mart Retail, eClerx Services, and Equitas Small Finance Bank.
Most Popular New Additions
Honasa Consumer Ltd., the parent company of the Mamaearth brand, was the most popular fresh purchase, with Helios and Trust Mutual Fund initiating positions. Gujarat Gas and Exide Industries also attracted significant fresh interest from multiple fund houses like Franklin Templeton, Bandhan Mutual Fund, Nippon India Mutual Fund, and Quant Mutual Fund.
Sectors Under Pressure and Major Exits
While buying was broad-based, the electrical equipment sector experienced the most significant pressure. Fund managers reduced exposure to several companies within this segment as part of their portfolio rebalancing efforts.
- Sharpest Reductions: GE Vernova T&D India saw the steepest cut, with five AMCs reducing holdings. CCL Products (India), Multi Commodity Exchange of India (MCX), Aster DM Healthcare, and MTAR Technologies also faced notable selling activity.
- Complete Exits: Some fund houses entirely divested from Central Depository Services (India) Ltd (CDSL), Gujarat State Petronet, and the newly listed electric two-wheeler manufacturer Ather Energy.
This portfolio reshuffle indicates that small-cap fund managers continue to prioritize themes aligned with India's domestic manufacturing capabilities, healthcare growth, and resilient consumption patterns. They are also actively taking profits in areas where valuations may have become stretched, positioning their portfolios to capitalize on the ongoing capital expenditure cycle and robust demand trends.