VentureX SME Fund | Monthly Investor Update: June 2026

VentureX SME Fund has delivered a 31.9% return over the trailing three months ending June 2026. That number means a lot more once you look at what the rest of the market was doing at the same time. The fund beat the Nifty 50 by 26.3% points and outperformed gold by 37.9% points over the same stretch. It also finished 14.8% points ahead of the average market return of 17.1% for the quarter.

Put simply, while gold slipped into negative territory and broad indices delivered returns in the single digits to mid-teens, our SME-focused, high-conviction portfolio returned nearly six times what the Nifty 50 did in the same three months.

This is the outcome of staying selective in a market where SME primary issuance has been running hot. As the SME section below shows, June alone saw a sharp divide between IPO winners and losers, and that same discipline, backing quality over volume, is what has driven the fund's returns this quarter.

June 2026 felt like a tug of war between bulls and bears, and by the end of the month, the bulls had the upper hand. The Nifty 50 closed 1.67% higher at 23,865.75, while the Sensex rose 1.69% to 76,478.67. For the majority of the month, however, the market remained sideways. A sharp selloff in IT stocks, growing nervousness ahead of the June-quarter earnings season, and uncertainty over the US rate outlook kept investors on edge and unwilling to chase the market higher. Things started looking up only in the final stretch, as easing tensions in West Asia and softer crude oil prices gave sentiment a bit of a lift.

The real story was underneath the headline numbers. Banking and financial stocks carried the market this month. Nifty Bank rose 6.41%, while Nifty Private Bank rose 6.43%. IT stocks declined 9.56%, weighing on overall sentiment. Mid-cap and small-cap stocks outperformed the large-cap benchmarks through the month, a pattern that has direct relevance for how we think about SME-focused portfolios.

Volatility was a recurring theme. India VIX swung sharply through the month, compressing from levels above 27 to near 13 in the final week alone, as developing Iran-US talks progressively eased the geopolitical risk premium that had been weighing on sentiment. By month-end, the Nifty was holding comfortably above 24,000 and the Sensex had settled above 77,000 on its monthly expiry, giving the market a constructive base heading into July.

The market's near-term direction is being shaped by three forces. First, the June-quarter earnings season is now underway, and how IT and banking majors report will set the tone for July. Second, the US Federal Reserve's rate path continues to be a swing factor for FII flows into Indian equities. Third, geopolitical developments, particularly around West Asia, remain a live input into crude prices and, by extension, inflation and rate expectations at home.

On the domestic side, institutional investors kept buying through the ups and downs, and that steady hand absorbed much of the selling pressure coming from foreign investors on the weaker days. This has quietly become one of the defining patterns of 2026: when global sentiment wobbles, domestic money has been there to hold the market up.

SME Market: A Record-Setting Stretch

The SME primary market had one of its most active periods of the year in June. A total of 19 IPOs made their debut during the month, though the results were sharply divided: only 7 companies closed with listing-day gains while 12 slipped into negative territory. 

That polarization is worth sitting with. It's a reminder that SME IPO enthusiasm and SME IPO quality are two different things, and the gap between the best and worst performers this month was as wide as it has been all year.

The broader SME IPO pipeline hasn't slowed down. As of early July, 87 SME companies have raised ₹3,982.49 crore through IPOs so far in CY26, compared to 28 mainboard companies mobilizing ₹23,011.61 crore in the same period. June 24 alone saw four SME companies debut together, and that pace has only accelerated since, with single-day listing records being broken again in early July.

For a fund built on the LMVT framework, leadership, moat, valuation, and tailwinds, this kind of primary market activity is exactly the environment we're built for. When 12 out of 19 listings finish in the red, the gap between a well-run SME and a well-marketed one becomes impossible to ignore. That gap is where our returns this quarter came from, and it's where we expect to keep finding them through the rest of the year.

During the quarter, we exited our positions in Workmates Core2Cloud Solutions Ltd. and Gallard Steel Limited after identifying a clear sectoral downtrend. Both companies had strong underlying fundamentals, but persistent weakness in the IT services and railway manufacturing sectors began weighing on performance. With valuations already having rerated significantly from our entry point, we chose to lock in gains and redeploy that capital into positions with a cleaner near-term setup. This is a discipline we hold ourselves to even when it means walking away from a company we still believe in on paper: the sector tailwind matters as much as the company itself.

Workmates Core2Cloud Solutions Ltd

Three things drove this exit. The company's EBITDA to CFO conversion turned negative, a red flag that earnings on paper were not converting into actual cash in the business. Alongside this, receivables were rising faster than revenue, an unusual pattern for an IT services company where collections are typically tighter. And a large share of the company's revenue is tied to AWS, which concentrates its fortunes around a single technology partner rather than a diversified client or platform base. Individually, any one of these might have been manageable. Together, they changed the risk profile of the position enough for us to step back.

Gallard Steel Limited

Gallard's exit was driven by the same sectoral weakness we saw playing out across railway manufacturing through the quarter. Order inflows and execution timelines in the segment slowed more broadly, and with the stock having already rerated sharply from our entry level, the risk-reward on holding further no longer justified the position. The company's core business remains sound, but we'd rather re-enter once the sector shows clearer signs of a turn than hold through a prolonged soft patch on stretched valuations.

E2E Transportation Infrastructure Ltd

Our exit here was less about a red flag and more about timing. The company's growth story is built around the Kavach rail safety theme, but the meaningful revenue from Kavach-linked orders isn't expected to start flowing in until FY28. That's a long runway to hold capital against, especially with railway manufacturing broadly under pressure right now. We're keeping the company on our watchlist and will look to re-enter at a more attractive valuation closer to when that revenue visibility actually improves.

In summary, VentureX SME Fund delivered a 31.9% three-month return, nearly six times the Nifty 50 over the same period, even as markets stayed volatile and gold turned negative. June's SME primary market underlined why selectivity matters, with a sharp divide between listing winners and losers. We exited three positions on sectoral weakness while staying disciplined on entry points elsewhere and remain focused on quality over pace heading into the next quarter.

Disclaimer: Investments in Alternative Investment Funds are subject to market risks. Past performance is not indicative of future returns. Please read the scheme information document and related disclosures carefully before investing. This update is intended solely for existing investors of the VentureX SME Fund and should not be construed as investment advice or a solicitation to invest.