The small cap category has offered an average return of 34.91% in the three-year period. Around 21 small cap funds have completed three years of existence in the market. Around 15 small cap schemes gave returns ranging 31.04-38.42% in the same time period. ITI Small Cap Fund offered the lowest return of around 26.07%.
Quant Small Cap Fund, which manages assets of Rs 9,520.76 crore, offered 44.01% against 36.17% by the benchmark (Nifty Smallcap 250 – TRI).
Nippon India Small Cap Fund, the largest scheme in the category, also managed to beat its benchmark (Nifty Smallcap 250 – TRI). The scheme gave 42.25% against 36.17% by the benchmark. The scheme manages assets of Rs 37,319.33 crore.
HSBC Small Cap Fund that manages assets of more than Rs 10,000 crore also managed to beat its benchmark (Nifty Smallcap 250 – TRI). The benchmark gave 36.17% in the three-year period.
Small cap schemes are benchmarked against Nifty Smallcap 100 – TRI, Nifty Smallcap 250 – TRI, and S&P BSE 250 Small Cap – TRI. The benchmarks gave 32.27%, 36.17%, and 35.08% respectively in the three year horizon.
The small cap category gave around 22.90%, 19.16%, and 22.14% in five, seven, and 10 year horizons respectively. Around 16 schemes have completed five years of existence in the market. Out of 16 small cap schemes, 14 schemes have offered more than 20%. Quant Small Cap Fund, the topper in the category, offered 29.09%. Nippon India Small Cap Fund gave 26.04%. Axis Small Cap Fund gave 25.57%. Around 10 schemes have completed 10 years in the market, and out of these 10 schemes, seven gave more than 20%.
We considered regular and growth options for the analysis.
Note, the above exercise is not a recommendation. This exercise was just to find out how many small cap funds have offered more than 40% return in the three-year horizon.
One should not make investment or redemption decisions based on the above exercise. One should always consider goal, investment horizon, and risk appetite before making investment decisions.
Small cap schemes invest in very small companies or their stocks. That is why investing in small cap stocks is considered extremely risky. The small cap segment can be extremely volatile in the short term, but they have the potential to offer very high returns over a long period.
Small cap schemes are recommended only to aggressive investors with a high-risk appetite and long investment horizon, say, around seven to 10 years. ETMutualFunds do not recommend small cap schemes to new and inexperienced investors.
If you are looking for recommendations, see:
Best small cap mutual funds to invest in 2023