Best Small Cap Mutual Funds
Small-cap mutual funds primarily invest their fund corpus in stocks of companies with a market capitalisation of less than Rs.5,000 crore. They are a sub-category of equity mutual funds, and thus their performance is impacted by market fluctuations. That said, the best small-cap mutual funds have the potential to generate substantial returns in the long term.
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List of Small Cap Mutual Funds in India
| Fund Name | Category | Risk | 1Y Returns | Rating | Fund Size(in Cr) | |
|---|---|---|---|---|---|---|
| Bank of India Small Cap Fund | Equity | Very High | 5.5% | 5 | ₹291 | |
| Canara Robeco Small Cap Fund | Equity | Very High | 18.1% | 5 | ₹2,560 | |
| Axis Small Cap Fund | Equity | Very High | 11.8% | 5 | ₹8,984 | |
| Kotak Small Cap Fund | Equity | Very High | 7.5% | 4 | ₹7,192 | |
| Edelweiss Small Cap Fund | Equity | Very High | 6.7% | 4 | ₹1,116 | |
| Nippon India Small Cap Fund | Equity | Very High | 11.5% | 4 | ₹18,675 | |
| SBI Small Cap Fund | Equity | Very High | 7.0% | 4 | ₹11,831 | |
| Quant Small Cap Fund | Equity | Very High | 2.2% | 3 | ₹1,754 | |
| Union Small Cap Fund | Equity | Very High | 6.4% | 3 | ₹585 | |
| ICICI Prudential Smallcap Fund | Equity | Very High | 13.7% | 3 | ₹3,611 | |
| Tata Small Cap Fund | Equity | Very High | 5.7% | 3 | ₹2,048 | |
| DSP Small Cap Fund | Equity | Very High | 7.5% | 3 | ₹8,323 | |
| Invesco India Smallcap Fund | Equity | Very High | 3.1% | 3 | ₹1,203 | |
| L&T Emerging Businesses Fund | Equity | Very High | 11.6% | 3 | ₹7,580 | |
| IDBI Small Cap Fund | Equity | Very High | 12.7% | 3 | ₹127 | |
| View All |
Features of Small Cap Funds
Here are some features of small-cap mutual funds:
Asset allocation: According to the Securities and Exchange Board of India (SEBI) rules, small-cap funds must allocate at least 65% of their investment corpus to small-cap stocks.
Risk-reward ratio: The top small-cap mutual funds are associated with higher risk levels compared to mid-cap and large-cap funds over the short and medium term. Nevertheless, they can generate substantial returns and even outperform other equity-oriented funds over the long term.
Taxability
Short-term capital gains tax: If the holding period of the units sold is less than 1 year, the short-term capital gains are taxed at 15%, irrespective of the realised sum.
Long-term capital gains: LTCG tax of 10% is applicable on gains exceeding Rs.1 lakh if the holding period is more than 1 year. On the flip side, if the cumulative capital gain is within Rs.1 lakh for a financial year, it is tax-free.
Who Are These Funds Suited For?
Small-cap funds are associated with higher risk when compared with other types of equity funds. The underlying stocks are severely impacted in a bearish market due to small-cap companies’ perceived financial and organisational instability. Thus, these funds may suffer huge losses during a bearish trend. However, in a bullish market, these mutual fund schemes can generate substantial returns and even outperform large and mid-cap funds. That said, they must also consider certain aspects that will help them choose the best small-cap mutual fund scheme.
Investors must make sure to take the following things into account before investing in small-cap mutual funds:
Investment goal: When choosing the right investments, there is seldom a “one size fits all” solution. The investment goals and horizons are not the same among all individuals. One person may be looking to invest for 3 years, while another might be ready to earmark their savings for 10 years. The choice of small-cap MF scheme for investor A and investor B will vary accordingly. Hence, investors need to identify their financial objective before investing in any of the best small-cap funds 2022.
Expense ratio: It is the annual fee levied by an Asset Management Company (AMC) on investors. It measures the % of fund assets utilised towards operating and administrative expenses, comprising fund manager’s fee, custodial service fee, legal expenses, etc. This charge differs from one scheme to another. Hence, individuals must consider the fund's expense ratio before allocating their funds to it since it determines the precise % of returns they realise.
Past performance of the fund: The returns generated by a fund since its inception give an idea regarding the variables that have influenced the same in the past. Hence, it’s an essential factor to consider for investors willing to invest in small-cap mutual funds. However, trailing performance may not be a strict indicator of a scheme’s prospects.
Experience of the fund manager: A particular scheme’s performance is directly impacted by the decisions of fund managers as they buy and sell securities based on their research and analysis. Thus, it’s crucial to glance through a respective fund managers qualifications and previous performance before investing in small-cap funds.
Portfolio composition: Although a scheme’s composition can vary going forward, analysing the current holdings can be insightful. It offers a glimpse of the sectors a particular plan is covering presently and the value it can provide.
Direct or regular plan: A direct plan is offered by an asset management company (AMC) directly. In this case, there is no involvement of a third party, for example, brokers, and distributor, unlike a regular plan. Hence, direct plans have a lower expense ratio. Furthermore, since no brokerage or commission is necessary in direct methods, they report a higher NAV than regular plans.
Major Advantages
Here are some of the benefits of investing in the best small-cap mutual funds:
- High growth potential: These funds possess immense growth potential. It’s because small-cap companies have an aggressive expansion strategy that can boost their growth significantly, especially over the long term.
- Ability to outperform other equity funds: In case the large-cap and mid-cap funds are not delivering returns per expectations, small-cap mutual funds can be a suitable portfolio inclusion. These tend to offer better gains, thus, balancing your portfolio.
- Researched diversification: The best small-cap mutual funds usually invest in stocks of companies with massive potential to generate returns. Fund managers conduct extensive research to analyse the top-performing stocks and invest accordingly. It lets investors diversify their portfolio but with calculated risk.
Investment route: Investors can allocate their savings to small-cap funds via two ways: lump sum and Systematic Investment Plan (SIP). By opting for the first option, individuals can invest the total amount they want to invest in at one go. Nevertheless, please note that one may have to invest a minimum of Rs.1,000 in this case. On the contrary, SIP allows investors to allocate their funds to a mutual fund scheme at fixed intervals (monthly, quarterly, etc.). The instalment amount can be as low as Rs.100 in this regard.
Let's have a closer look
Now let us jump and check about these top 10 mutual fund schemes.
Bank of India Small Cap Fund Direct Growth
Fund Performance: The Bank of India Small Cap Fund belongs to the Equity category of BOI AXA Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Bank of India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹291Cr |
| 1Y Returns | 5.5% |
Canara Robeco Small Cap Fund Direct Growth
Fund Performance: The Canara Robeco Small Cap Fund belongs to the Equity category of Canara Robeco Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Canara Robeco Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹2,560Cr |
| 1Y Returns | 18.1% |
Axis Small Cap Fund Direct Growth
Fund Performance: The Axis Small Cap Fund has given 26.27% annualized returns in the past three years and 19.45% in the last 5 years. The Axis Small Cap Fund belongs to the Equity category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹8,984Cr |
| 1Y Returns | 11.8% |
Kotak Small Cap Fund Direct Growth
Fund Performance: The Kotak Small Cap Fund has given 29.33% annualized returns in the past three years and 17.21% in the last 5 years. The Kotak Small Cap Fund belongs to the Equity category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹7,192Cr |
| 1Y Returns | 7.5% |
Edelweiss Small Cap Fund Direct Growth
Fund Performance: The Edelweiss Small Cap Fund belongs to the Equity category of Edelweiss Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Edelweiss Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,116Cr |
| 1Y Returns | 6.7% |
Nippon India Small Cap Fund Direct Growth
Fund Performance: The Nippon India Small Cap Fund has given 26.69% annualized returns in the past three years and 17.53% in the last 5 years. The Nippon India Small Cap Fund belongs to the Equity category of Nippon India Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Nippon India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹18,675Cr |
| 1Y Returns | 11.5% |
SBI Small Cap Fund Direct Growth
Fund Performance: The SBI Small Cap Fund has given 24.97% annualized returns in the past three years and 18.71% in the last 5 years. The SBI Small Cap Fund belongs to the Equity category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹11,831Cr |
| 1Y Returns | 7.0% |
Quant Small Cap Fund Direct Plan Growth
Fund Performance: The Quant Small Cap Fund has given 37.94% annualized returns in the past three years and 19.14% in the last 5 years. The Quant Small Cap Fund belongs to the Equity category of Quant Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Quant Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,754Cr |
| 1Y Returns | 2.2% |
Union Small Cap Fund Direct Growth
Fund Performance: The Union Small Cap Fund has given 26.13% annualized returns in the past three years and 13.85% in the last 5 years. The Union Small Cap Fund belongs to the Equity category of Union Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Union Small Cap Fund via lump sum is ₹1,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹585Cr |
| 1Y Returns | 6.4% |
ICICI Prudential Smallcap Fund Direct Plan Growth
Fund Performance: The ICICI Prudential Smallcap Fund has given 25.62% annualized returns in the past three years and 14.99% in the last 5 years. The ICICI Prudential Smallcap Fund belongs to the Equity category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Smallcap Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹3,611Cr |
| 1Y Returns | 13.7% |
Tata Small Cap Fund Direct Growth
Fund Performance: The Tata Small Cap Fund belongs to the Equity category of Tata Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Tata Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹150.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹2,048Cr |
| 1Y Returns | 5.7% |
DSP Small Cap Direct Plan Growth
Fund Performance: The DSP Small Cap Fund has given 23.13% annualized returns in the past three years and 11.46% in the last 5 years. The DSP Small Cap Fund belongs to the Equity category of DSP Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in DSP Small Cap Fund via lump sum is ₹500 and via SIP is ₹500.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹8,323Cr |
| 1Y Returns | 7.5% |
Invesco India Smallcap Fund Direct Growth
Fund Performance: The Invesco India Smallcap Fund belongs to the Equity category of Invesco Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Invesco India Smallcap Fund via lump sum is ₹1,000 and via SIP is ₹500.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹1,203Cr |
| 1Y Returns | 3.1% |
L&T Emerging Businesses Fund Direct Growth
Fund Performance: The L&T Emerging Businesses Fund has given 21.26% annualized returns in the past three years and 13.22% in the last 5 years. The L&T Emerging Businesses Fund belongs to the Equity category of L&T Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in L&T Emerging Businesses Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹7,580Cr |
| 1Y Returns | 11.6% |
IDBI Small Cap Fund Direct Growth
Fund Performance: The IDBI Small Cap Fund belongs to the Equity category of IDBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in IDBI Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹127Cr |
| 1Y Returns | 12.7% |
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