There are three major categories of mutual funds according to the market caps. These are large-cap, mid-cap, and small-cap mutual funds. Investment in small-cap mutual funds is associated with higher risk levels than large and mid-cap funds as they invest in lesser-known and under-researched companies. Small-cap schemes can witness intense volatility during bearish market phases. but they can even outperform all categories of mutual funds over the long term. Here is a list of 10 small-cap funds with the highest three-year returns as per data based on data available on Value Research.
List of 10 small cap funds with the highest 3-year returns
Quant Small Cap Fund – Direct Plan 55.66%
Nippon India Small Cap Fund- Direct Plan 48.35%
HSBC Small Cap Fund – Direct Plan 46.00%
HDFC Small Cap Fund – Direct Plan 45.42%
Canara Robecco Small Cap Fund- Direct Plan 44.19%
Tata Small Cap Fund – Direct Plan 43.71%
Kotak Small Cap Fund- Direct Plan 43.12%
Franklin India Smaller Companies Fund 41.89%
Sundaram Small Cap Fund- Direct Plan- 40.85%
Axis Small Cap Fund – Direct Plan 37.95%
Taxation on small-cap mutual funds
Capital gains from Small Cap Fund units that have a holding period of up to one year are known as short-term capital gains (STCG), and they are taxed at 15%. If the holding period exceeds more than one year, the gains are considered Long-Term Capital Gains (LTCG). Mumbai-based tax and investment expert Balwant Jain said that up to ₹1 lakh from equity investments in a financial year is tax-free. However, if the amount exceeds ₹1 lakh in a financial year, the gains are taxed at 10%.
Small cap mutual fund schemes witnessed a massive increase in the inflow of funds by 67 percent in the month of June to hit a high of ₹5,471.75 crore against ₹3,282.50 crore in the preceding month, showed the latest AMFI data.
In other news, capital markets regulator Sebi has allowed mutual funds to introduce five new categories under ESG (environmental, social, and governance) scheme and put in place a disclosure framework for them. The five new categories are — exclusions, integration, best-in-class and positive screening, impact investing, and sustainable objectives.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Download The Mint News App to get Daily Market Updates & Live Business News.
Updated: 28 Jul 2023, 02:25 PM IST