Over the past year, the BSE smallcap fund has seen a gain of around 33%, while the Sensex was up 24%. These results clearly demonstrate that smallcap is outperforming the benchmark. Smallcap mutual funds (MFs) are the ones that invest at least 65% of the corpus in smaller companies. SEBI has defined small companies as firms that are ranked above 250 (251st onwards) in terms of market capitalization.The real challenge lies in identifying promising stocks within the smallcap fund category. There are several approaches to selecting the finest stocks, and ETMarkets has analyzed stocks favoured by smallcap MFs. These stocks are backed by extensive research and are often preferred by major institutional investors. 26 stocks had investments from 10 or more smallcap mutual funds. Most of these stocks have delivered positive returns over the past year. Today’s analysis focuses on seven stocks that have gained over 80% price return in the last year and are currently held by more than 10 smallcap MFs as of May ’23. (Data Source: ACE MF).