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Smallcaps, infra, PSU mutual funds make investors richer with 30% CAGR in 5 years



Mutual funds focused on smallcap, capex and PSU stocks have delivered the highest returns in the last five years, reflecting their strong performance on Dalal Street. Out of the 21 equity categories, smallcap, infra and PSU funds have offered over 30% CAGR during the period.

Small Cap Funds

Small caps funds led the return chart by offering an average return of 33.55% in the last five years. Around 19 smallcap funds have marked their presence for five years in the market. Quant Small Cap Fund, the topper in the category, offered a 49.39% return in the last five years.
Nippon India Small Cap Fund, the largest small cap fund based on assets managed, delivered a 38.60% return in the said time period. Aditya Birla Sun Life Small Cap Fund gave the lowest return of around 25.36% in the same time period.

“I would not recommend investors put more than 8% to 10% of their portfolio holdings into small-cap funds. Investing in good flexi caps or multi-cap funds will be a good strategy, wherein the decision to move across different cap stocks will be made by the fund manager. We should do our research and select a good fund manager and then trust him completely to take care of our investments,” recommends Rajesh Minocha, a Certified Financial Planner (CFP) and founder of Financial Radiance.

Also Read | Pharma & healthcare MFs top return chart in August, offer 5% return

PSU Funds

PSU theme-based mutual funds have delivered an average return of 32.58% in the last five years. There were only three PSU funds in the said period. CPSE ETF, the largest scheme and the topper in the category, offered a 35.64% return in the said period.
Invesco India PSU Equity Fund, the oldest fund in the category, gave a 32.60% return in the said period. SBI PSU Fund offered a 29.48% return.

“Investors getting into these funds now should have an investment horizon of 4/5 years. The future returns expectations should be based on the last 5/7 years annual returns of these funds and not on the last 1/2 year returns,” recommends Manish Kothari, Co-founder & CEO, of ZFunds.

Also Read | Quant Mutual Fund dominates list of schemes with negative returns in one month

Infrastructure Funds

Mutual funds based on the Infrastructure sector have offered an average return of around 30.65% in the last five years. Around 18 infrastructure funds have completed five years of existence in the market. Quant Infrastructure Fund gave the highest return of 38.92% in the last five years.


Invesco India Infrastructure Fund which gave 33.53% return in the same time period. UTI Infrastructure Fund gave the lowest return of around 24.87% in the same period.

“The infrastructure sector is set to benefit significantly from increased government capital expenditure, particularly in areas like transportation, urban development, and smart cities. Public-Private Partnerships (PPPs) and the push for large-scale infrastructure projects are expected to bring in private capital and expertise, driving growth in the sector. Additionally, the focus on renewable energy infrastructure and the expansion of electric vehicle (EV) charging networks present long-term opportunities for investors,” according to Sagar Shinde, VP Research, Fisdom.

The other 18 equity mutual fund categories that have been there in the market in the last five years offered CAGR ranging between 10.49% to 29.73%. The international funds gave the lowest CAGR of 10.49% in a similar time frame. The largecap funds gave 19.21% CAGR.

Both focused funds and flexi cap gave CAGR of 21.21% and 21.76% respectively in the same time period. Midcap funds offered 29.17% CAGR in a similar time period.

One should always consider risk appetite, investment horizon, and goal before making any investment decision. One should invest in sectoral/thematic schemes only if you have a long investment horizon or have intimate knowledge about the sector to time the entry and exit in these schemes. Remember, every sector or theme can go out of fashion depending on the economic conditions. You should not make hasty decisions in those phases.

Smallcap schemes are always considered risky. However, they also have the potential to deliver very high returns over a long period of time. The trouble is these schemes are also notorious for their very long bear phases. When the market gets into a lean phase smallcap segments lose heavily as investors look for safer investment options.

This is why ETMutualFunds do not recommend smallcap schemes to new and inexperienced investors. We always tell investors to gain experience and knowledge before investing in smallcap schemes. We believe that only investors with a very high-risk appetite and stomach for volatility should invest in small cap schemes. They also should have a long investment horizon of, say, seven to 10 years.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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