If you are a mutual fund investor with a high-risk appetite then there are no prizes for guessing that you already have a considerable exposure to small-cap mutual funds.
Amid the ongoing bull run where Sensex has given over 18 percent return and Nifty50 over 20 percent, small cap mutual funds have given even better returns for obvious reasons. Thanks to the bull run, retail investors in 2023 were considerably incentivised to invest more in equity funds vis-à-vis debt mutual funds.
As a result, cumulative inflow into equity funds for the year 2023 (until Nov 30) stood at ₹1,44,576 crore, more than four times the inflow in debt mutual funds ( ₹29,470 crore).
Small cap funds
For the unversed, small cap mutual funds refer to the schemes, which have a minimum of 65 percent exposure to small cap stocks. These stocks are the securities of companies ranked below top 250 entities as per market capitalisation on stock exchanges.
Small cap mutual funds are essentially meant for the investors with a high-risk appetite since they are more volatile than their larger counterparts. This means when the market is on a rise, small cap mutual funds rise even more. On the other hand, when the market is on a fall, these mutual funds fall even steeper.
These are the top 10 small cap mutual funds of 2023:
| Small Cap mutual funds | Return (%) |
| Mahindra Manulife Small Cap Fund | 57.18 |
| Bandhan Small Cap Fund | 53.60 |
| Franklin India Smaller Companies Fund | 52.15 |
| ITI Small Cap Fund | 51.93 |
| Nippon India Small Cap Fund | 48.92 |
| Quant Small Cap Fund | 46.38 |
| HSBC Small Cap Fund | 46.05 |
| Sundaram Small Cap Fund | 45.29 |
| HDFC Small Cap Fund | 44.84 |
| Invesco India Smallcap Fund | 44.10 |
(Source: AMFI; 1-year-returns as on Dec 29, 2023)
As we can see in the table above, four schemes delivered more than 50 percent in the past one year while the remaining six gave more than 40 percent returns.
The schemes top performing small cap mutual fund schemes include Mahindra Manulife Small Cap Fund, Bandhan Small Cap Fund and Franklin India Smaller Companies Fund.
It is also vital to mention that historical returns – albeit important while deciding whether to invest or not – are not a guarantee of future growth potential of a mutual fund scheme.
The other factors that should weigh on an investor’s mind at the time of committing an investment include the category of mutual fund scheme, reputation of the fund house, past performance of the fund manager, inherent risk of the scheme, among others.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
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Published: 01 Jan 2024, 11:18 AM IST