Top 10 Small Cap Mutual Fund With Best Returns in 5 years (October 2022)

What Is Small Cap Mutual Fund?

 

The term “cap” refers to a company’s market capitalisation, which is defined by the entire market value of its publicly traded shares. Small-cap funds invest in firms whose market capitalization ranks outside the top 250. Small-cap funds are required by SEBI to invest at least 65 percent of their assets in small-cap companies. Small-cap companies are in their infancy of growth and have a long way to go before they consistently deliver growth as compared to mid-cap and large-cap companies.

 

 

During a bullish market phase, small-cap funds can achieve excellent returns. However, these products can experience a sharp decline in returns under adverse market conditions. Investors should exercise caution while investing in small-cap funds. Invest in these funds only if you comprehend the inherent risk and have the patience to remain invested for at least seven years or more.

 

Who Should Invest In Them?

 

Small-cap mutual funds are best suited for investors with higher risk tolerance.

 

• Small-cap mutual funds are for ambitious investors who are willing to maintain a longer-term investment in mutual funds.

 

• Due to the volatility associated with small-cap companies, investors must possess a greater risk appetite.

 

• Small-cap mutual funds are for investors with a tolerance for portfolio value changes; consequently, it is prudent to invest only a small share in them.

 

• When investing in small-cap mutual funds, it is advised to opt for systematic investment plans (SIPs) over lump-sum investments. Rupee cost averaging would benefit investment and lower the holding cost.

 

• Lastly, an investor can invest not more than 10 to 15 percent of their equity exposure, and the investment portfolio should be properly aligned with their financial objectives.

 

Things To Consider Before Investing In Them

 

Small-cap mutual funds have the potential for long-term growth and attractive returns.   Prior to investing in small-cap mutual funds, investors should consider the following factors.

 

• Financial Objective: Typically, Small-cap mutual funds are suitable for investors with long-term financial objectives, such as saving for their children’s education or retirement, paying off debt, etc.

 

• Investment horizon: When investing in small-cap mutual funds, investors should have a long-term investment horizon. These fund schemes are highly volatile and may experience a sharp decline in returns during a brief unfavourable market trend.

 

• Small-cap enterprises require time to realize their growth potential and economies of scale. To obtain capital appreciation, it is recommended to invest for a minimum of five to seven years.

 

• Tax on gains: Small-cap mutual fund capital gains are subject to taxation, with the rate of taxation depending on the holding term. Short-term capital gains (12 months or less) are taxed at 15%, but long-term gains (12 months or more) are taxed at 10%.

 

• Performance: Prior to investing, investors should monitor the performance of small-cap mutual funds during the previous five years. Small-cap mutual funds are diverse, unlike large-cap mutual funds. Four to five years of consistent performance of small-cap mutual funds is a good indicator of the performance of mutual funds. however, past performance does not guarantee future returns.

 

• Risk: The volatility of small-cap mutual funds is greater than that of large-cap and mid-cap mutual funds. As these businesses are less established, small-cap funds suffer greatly when markets are performing poorly. While it is an excellent investment for people with a high-risk tolerance and a desire for significant long-term returns.

 

Top 10 Small Cap Mutual Fund Schemes With Best Returns In 5 years (October 2022)

 

Scheme	5-Year Return	AUM (INR) (Cr)
Quant Small Cap Fund	22.65%	2,286.73
Axis Small Cap Fund	21.09%	10,972.56
Kotak Small Cap Fund	18.79%	8,552.47
Nippon India Small Cap	18.78%	22,746.13
SBI Small Cap Fund	18.73%	14,759.38
ICICI Prudential Smallcap Fund	16.65%	4,290.38
Union Small Cap Fund	16.30%	1,123,45
HDFC Small Cap Fund	15.68%	14,194.57
IDBI Small Cap Fund	14.34%	156.93
L&T Emerging Businesses Fund	12.63%	8,535.80

Source: AMFI (data as of 10/10/2022)

 

Closer Look Over Top 10 Small Cap Fund (as per 5-Year Return)

 

• Quant Small Cap Fund

 

Quant Small Cap Fund Direct Plan-Growth is a small cap mutual fund. This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, Quant Tiny Cap Fund Direct Plan-Growth has INR 2,286.73 Crores in assets under management (AUM) and is a small fund within its category. The fund’s expense ratio of 0.62% is lower than that of the majority of other Small Cap funds. The one-year returns on the Quant Small Cap Fund Direct Plan-Growth were 5.17 percent. Since its inception, it has generated average yearly returns of 15.81%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are invested in the Consumer Staples, Services, Materials, Healthcare, and Construction industries. It has a smaller allocation to the Consumer Staples and Services sectors than other funds in its category.

 

• • ITC Ltd., IRB Infrastructure Developers Ltd., Ambuja Cements Ltd., Hindustan Copper Ltd., and Himachal Futuristic Communications Ltd. are the top five holdings of the fund.

 

• Axis Small Cap Fund

 

This fund has existed for 8 years and 11 months, having been established on 11/11/2013. As of 10th October 2022, Axis Small Cap Fund Direct-Growth has INR 10,972.56 Crores in assets under management (AUM) and is a medium-sized fund within its category. This fund has a lower expense ratio than the vast majority of other Small Cap funds.

 

• • The returns of the Axis Small Cap Fund Direct-Growth during the past year were 5.75 percent. Since its inception, it has generated average yearly returns of 24.81%. Every three years, the fund has doubled the money invested in it.

 

• • The majority of the fund’s assets are invested in the Chemical, Healthcare, Technology, Financial, and Construction industries. It has less exposure to the Chemicals and Healthcare sectors than other funds in the same category.

 

• • Fine Organic Industries Ltd., Galaxy Surfactants Ltd., Narayana Hrudayalaya Ltd., Brigade Enterprises Ltd., and Krishna Institute Of Medical Sciences Ltd. are the top five holdings of the fund.

 

• Kotak Small Cap Fund

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, Kotak Small Cap Fund Direct-Growth has INR 8,552.47 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.59% is lower than that of the majority of other Small Cap funds.

 

• • The returns of the Kotak Small Cap Fund Direct-Growth for the past year were 2.01%. Since its inception, it has generated average yearly returns of 20,49%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are allocated to the Materials, Consumer Discretionary, Chemicals, Metals & Mining, and Capital Goods industries. It has less exposure to the Materials and Consumer Discretionary industries than other funds in its category.

 

• • Century Plyboards (India) Ltd., Carborundum Universal Ltd., Sheela Foam Ltd., Galaxy Surfactants Ltd., and Ratnamani Metals & Tubes Ltd. are the top five holdings of the fund.

 

• Nippon India Small Cap

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, Nippon India Small Cap Fund Direct-Growth has INR 22,746.13 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.87 percent is greater than that of the majority of other Small Cap funds.

 

• • The one-year returns on the Nippon India Small Cap Fund Direct-Growth were 10.17 percent. Since its inception, it has generated average yearly returns of 25.46 percent. Every two years, the fund has quadrupled the money put in it.

• • The majority of the fund’s assets are invested in the Financial, Chemical, Consumer Staples, and Services sectors. It has less exposure to the Capital Goods and Financial sectors than other funds in the same category.

• • TI Financial Holdings Ltd, KPIT Engineering Ltd, Magma Fincorp Ltd., Fine Organic Industries Ltd, and Tejas Networks Ltd. are the top five holdings of the fund.

 

• SBI Small Cap Fund

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, SBI Small Cap Fund Direct-Growth has INR 14,759.38 Crores in assets under management (AUM) and is a medium-sized fund within its category. The cost ratio of 0.72 per cent is comparable to that of the majority of other Small Cap funds.

 

• • The returns of the SBI Small Cap Fund Direct-Growth during the past year were 12.07%. Since its inception, it has generated average yearly returns of 26.52%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are allocated to the Consumer Discretionary, Capital Goods, Services, Metals & Mining, and Chemicals sectors. It has less exposure to the Consumer Discretionary and Capital Goods sectors than other funds in the same category.

 

• • Nifty Bank, Vedant Fashions Ltd., Blue Star Ltd., Fine Organic Industries Ltd., and Rajratan Global Wire Ltd. are the top five holdings of the fund.

 

• ICICI Prudential Small Cap Fund

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, ICICI Prudential Smallcap Fund Direct Plan-Growth has INR 4,290.38 Crores in assets under management (AUM) and is a medium-sized fund within its category. The cost ratio of 0.8% is comparable to that of the majority of other Small Cap funds.

 

• • The one-year returns for the ICICI Prudential Smallcap Fund Direct Plan-Growth are 5.85%. Since its inception, it has generated average yearly returns of 17.28%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are invested in the Services, Healthcare, Capital Goods, Construction, and Financial industries. It has less exposure to the Services and Healthcare sectors than other funds in the same category.

 

• • Rolex Rings Ltd., INOX Leisure Ltd., CCL Products (India) Ltd., Krishna Institute Of Medical Research Ltd., and Kei Industries Ltd. are the top five holdings of the fund.

 

• Union Small Cap Fund

 

This fund has existed for eight years and four months, having been established on May 20, 2014. As of 10th October 2022, Union Tiny Cap Fund Direct-Growth has INR 1,123,45 Crores in assets under management (AUM) and is a small fund within its category. The fund has a higher expense ratio than the majority of other Small Cap funds, at 1.36 percent.

 

• • Union Small Cap Fund Direct-Growth returns are 8.80% over the past year. Since its inception, it has generated average yearly returns of 15.69%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are allocated to the Services, Healthcare, Chemicals, Capital Goods, and Financial sectors. It has less exposure to the Services and Healthcare sectors than other funds in the same category.

 

• • Home First Finance Company India Ltd., ZF Commercial Vehicle Control Systems India Ltd., Tatva Chintan Pharma Chem Ltd., Neogen Chemicals Ltd., and JB Chemicals & Pharmaceuticals Ltd. are the top five holdings of the fund.

 

• HDFC Small Cap Fund

 

This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 10th October 2022, HDFC Small Cap Fund Direct-Growth has INR 14,194.57 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 0.83 percent, is comparable to that of the majority of other Small Cap funds.

 

• • The returns of the HDFC Small Cap Fund Direct-Growth for the past year were 1.94%. Since its inception, it has generated average annual returns of 18.75%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are invested in the Services, Capital Goods, Financial, Chemicals, and Consumer Discretionary industries. It has less exposure to the Services and Capital Goods sectors than other funds in the same category.

 

• • Bajaj Electricals Ltd., Sonata Software Ltd., Bank Of Baroda, Firstsource Solutions Ltd., and Aster DM Healthcare Ltd. are the top five holdings of the fund.

 

• IDBI Small Cap Fund

 

This fund has existed for 5 years and 4 months, having been established on 01/06/2017. IDBI Small Cap Fund Direct-Growth has INR 156.93 Crores in AUM as of 10th October 2022 and is a small fund within its category. The expense ratio of the fund, at 1.54%, is greater than that of the majority of Small Cap funds.

 

• • One-year returns for IDBI Small Cap Fund Direct-Growth were 10.18 percent. Since its inception, it has generated average yearly returns of 14.22%. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are invested in the Chemicals, Materials, Metals & Mining, and Consumer Discretionary sectors. It has less exposure to the Capital Goods and Chemicals sectors than other funds in the same category.

 

• • Elgi Equipments Ltd., Fine Organic Industries Ltd., Grindwell Norton Ltd., Kei Industries Ltd., and Timken India Ltd. are the top five holdings of the fund.

 

• L&T Emerging Businesses Fund

 

L&T Mutual Fund’s L&T Emerging Businesses Fund Direct-Growth is a Small Cap mutual fund. This fund has existed for eight years and five months, having been established on April 22, 2014. As of 10th October 2022, L&T Emerging Businesses Fund Direct-Growth has INR 8,535.80 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.78% is comparable to that of the majority of other Small Cap funds.

 

• • The one-year returns for the L&T Emerging Businesses Fund Direct-Growth were 6.15 percent. Since its inception, it has generated average yearly returns of 21,34 %. Every two years, the fund has quadrupled the money put in it.

 

• • The majority of the fund’s assets are invested in the sectors of Capital Goods, Materials, Metals & Mining, Construction, and Consumer Staples. It has less exposure to the Capital Goods and Materials sectors than other funds in the same category.

 

• • KPR Mills Ltd., Grindwell Norton Ltd., EID-Parry (India) Ltd., City Union Bank Ltd., and Brigade Enterprises Ltd. are the top five holdings of the fund.

 

FAQs

 

• Are Small Cap Funds risky?

 

Small Cap Mutual Funds invest in stocks, therefore they can be volatile in the short term. Long-term, however, the danger diminishes considerably.

 

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