Small-Cap Funds invest a large portion of their actively managed corpus in small-cap company, equity or equity-related securities, and undoubtedly they have also exploded in popularity in recent years among the investors. A small cap company is classified as one with a market capitalization of less than Rs. 500 crores. This means that small-cap mutual funds have a better chance of outperforming the benchmark. It's important to remember that small-cap funds are high-risk investments. These stocks, on the other hand, have a tremendous opportunity to have incredible returns. Small-cap stocks are very vulnerable to market fluctuations. As a result, when the market falls, these stocks are likely to suffer the most. As a result, when investing in Small-Cap Funds, it is pertinent to have a long-term investment period to ensure that the investment has enough time to generate decent returns. Small-cap funds are preferred if you have a high risk profile and a long investment period. Keeping all these factors in mind we have covered here the top 2 small cap funds which are rated 4-5 star by Value Research/CRISIL and have generated 1-year returns over 100%.
Kotak Small Cap Fund
This fund has generated a return of 125.13% in the last 1 year, whereas the fund's 3-year return and 5 year return have been 16.70% and 20.09%. The assets under management (AUM) of Kotak Small Cap Fund Direct-Growth is Rs 3.423 crores, and the latest NAV is Rs 138.21 as of 7 May 2021. The fund has a 0.60 percent expense ratio. Chemicals, Engineering, Construction, Metals, and FMCG make up the majority of the fund's holdings. Century Plyboards (India) Ltd., Sheela Foam Ltd., Carborundum Universal Ltd., Supreme Industries Ltd., and Persistent Systems Ltd. are the fund's top five holdings. This fund has been rated 4-star by Value Research which is acceptable.
ICICI Prudential Small Cap Fund Direct Plan Growth
ICICI Prudential Small Cap Fund Direct Plan-Growth has Rs 2,065 crores in assets under management (AUM) and a current NAV of Rs 40.38 as of May 7, 2021. The expense ratio of the fund is 0.83 percent. The bulk of the capital in the fund is invested in the sectors of services, construction, financial, engineering, and technology. Mahindra Lifespace Developers Ltd., V-Mart Retail Ltd., INOX Leisure Ltd., Dixon Technologies (India) Ltd., and KPIT Technologies Ltd. are the fund's top five holdings. This fund has also performed admirably among the best small cap funds in terms of one-year returns. The fund has also given a decent return of 109.55% across the last 1-year, while the 3 and 5 year returns of the fund is 10.86% and 15.89% respectively. The fund is rated 4 star by CRISIL and 3 star by Value Research.
1-5 Year Returns
|Fund||1 Year Returns||3 Year Returns||5 Year Returns||Rating|
|Kotak Small Cap Fund||125.13%||16.70%||20.09%||4 star by ValueResearch|
|ICICI Prudential Small Cap Fund Direct Plan Growth||109.55%||10.86%||15.89%||4 star by CRISIL|
Small Cap Funds give you insight to smaller companies that have the capacity to grow into mid- and large-sized businesses in the potential. Small caps, on the other hand, can be highly unstable in the short term, specifically if market dynamics are unfavourable. That being said, if you keep invested for a long period, you may outperform the benchmark. Small cap mutual funds are highly volatile, and you must exercise strict caution while investing in small cap funds. The above discussed funds may yield good returns only if you have a higher risk-tolerance and want to invest for long-run. But if you have a lower risk-profile and want to get risk-free returns than Public Provident Fund (PPF), Bank FDs, RBI Taxable Bonds can be a good bet here.