India's portfolio management services universe split sharply in September, with niche SME and small-cap strategies bucking a bruising market correction that dragged the Nifty and Sensex down by more than 6%. The divergence underscores how stock selection, sector concentration and exposure to domestic growth stories can overwhelm broader index weakness in a month marked by risk aversion, valuation compression and heavy selling across large-cap names.
SME Bets Lead Gains
Hem Securities' India Rising SME Stars scheme emerged as the standout performer, delivering a 7.23% return for the month, according to PMS Bazaar data. The result placed the strategy at the top of the PMS performance table and highlighted the resilience of carefully curated SME portfolios even when benchmark indices were under pressure. Other small-cap and SME-focused mandates also remained in positive territory, with several strategies posting gains of up to 7.5%.
The performance is notable because SME and small-cap portfolios are typically more volatile than large-cap funds. In a falling market, they often suffer sharper drawdowns due to lower liquidity and higher sensitivity to sentiment. September, however, appears to have rewarded managers who stayed concentrated in businesses with strong earnings momentum, domestic demand exposure and limited dependence on global macro trends.
Broad Market Pain Deepens
The broader PMS landscape told a very different story. Broad mid-cap and thematic strategies were among the hardest hit, with losses reaching as much as 10.16% during the month. That spread between the best and worst performers illustrates how quickly market leadership can rotate when investors move defensively and reduce exposure to higher-beta segments.
The weakness in benchmark indices added to the pressure. With the Nifty and Sensex both tumbling more than 6%, even managers with sound long-term positioning faced a difficult environment. In such conditions, thematic portfolios tied to cyclical sectors or crowded trades can underperform sharply if the underlying thesis is challenged by macro uncertainty, foreign outflows or a sudden de-rating in valuations.
For investors, the September numbers are a reminder that PMS returns can diverge materially from headline market moves. Unlike passive index investing, PMS performance depends heavily on manager skill, portfolio construction and the ability to identify businesses that can withstand short-term volatility. The month's results suggest that active management delivered value where it was most disciplined and selective, but punished strategies that were overly exposed to broad market beta.
What The Data Signals
The latest PMS Bazaar snapshot also offers a broader read on market sentiment. A strong showing from SME-linked strategies suggests that investors continued to reward earnings visibility and business-specific growth even as the overall market corrected. At the same time, the losses in mid-cap and thematic portfolios indicate that the market was not simply indiscriminately selling off; it was repricing risk more aggressively in segments where valuations had run ahead of fundamentals.
This pattern is important for the months ahead. If volatility persists, managers with a bottom-up approach and a bias toward balance-sheet strength may continue to outperform. But if the market stabilises and risk appetite returns, some of the underperforming mid-cap and thematic strategies could recover quickly, given their higher operating leverage and sensitivity to a rebound in sentiment.
For now, September stands out as a month in which the market's pain was not evenly shared. Large-cap benchmarks fell hard, but a select group of SME and small-cap PMS strategies managed to turn turbulence into gains. The result reinforces a familiar lesson in Indian equities: in a volatile market, the difference between outperformance and underperformance often comes down to stock selection, not just sector calls or index direction.