Steep valuations of large-cap index names and the sharp run in the broad market prompted mutual fund managers to look at niche growth stories in the midcap and small-cap spaces in September.

Strong flows into new fund offers in the mid-cap and multi-cap categories during the month led to flows into smaller shares.

Fund managers eyed companies that would benefit from the economic recovery, seasonal demand and incremental demand arising out of improving capital expenditure.

Some of the stocks picked by the top five fund houses were Indian Energy Exchange, Wonderla Holidays, PTC India and APL Apollo Tubes. IPOs, too, found favour with fund houses which participated in the share sales of Vijaya Diagnostic Centre, Aditya Birla Sun Life AMC and Sansera Engineering.