Small cap mutual funds have given phenomenal returns to investors in the last one year. In fact, they have now outperformed largecaps and are increasingly sort after. Here are a few small cap mutual funds that could be good bets from a long-term perspective.
Reliance Small Cap Fund
This fund has been an outstanding performer in the last one year. In fact, the fund has generated a return of almost 42 per cent in the last one year. This probably beats most other asset classes, be it gold, equity or debt.
The three year returns from the fund has been 22.79 per cent. The fund invests bulk of its money in small cap stocks. At the moment Reliance Small Cap Fund's largest holding is in Navin Flourine International, Vindhya Telelinks, VIP Industries and Deepak Nitrite.
The current NAV of the fund is Rs 42.74 under the growth plan and Rs 33.27 under the dividend plan. The SIP Investment can be done with a small sum of Rs 100, after the initial sum of Rs 5,000.
Investing in Reliance Small Cap Fund through SIP
Since small cap funds are more riskier than the large cap funds, in terms of volatility it would be advisable to invest in the Reliance Small Cap fund through the SIP route.
At the moment you can invest with an initial amount of Rs 5,000 and small amounts of Rs 100 every month thereafter. The returns from Reliance Small Cap Fund compares well with other peers, which have seen significant rallies in the past few months. The expense ratio, which signifies the various administration and marketing related expenses is also reasonable at around 2 per cent.
DSP Blackrock Microcap Fund
This is one fund that has gained significant respect among investors. It has sizeable assets under management to the tune of Rs 6,219 crores, which is rather large for a small cap fund. Again, the returns from this fund has been amongst the best in its category.
The top holdings of the company include names like KPR Mills, Finolex Cables, SRF, Sarada Cropchem, APL Apollo Tubes etc. The fund which was launched in 2007 and has generated a return of 19.51 per cent since its launch. However, the portfolio is heavily skewed in favour of good quality stock names from the space.
Why to buy DSP Blackrock Fund?
It is always a tricky proposition to recommend among the best small cap funds for a number of reasons. First, is that it is fraught with risks, when the markets are at peak, as is the case now. Second, small caps are always risky bets.
Therefore, we once again advocate placing money through SIP route, which is a good way to hedge against risks. The current net asset value of the DSP Black Rock Fund is Rs 64.08, under the growth plan and Rs 38.91 under the dividend plan. Go for the scheme if you are a long term investor.
SBI Small and Midcap Fund
SBI Small & Midcap Fund is an open ended equity scheme and invests amount from the funds largely in Small and Midcap equity. This means that the fund is suitable for high-risk appetite investors.
The fund like most peers from the space has given phenomenal returns of 45 per cent in the last 1 year, with the 3 year returns being at 27 per cent on an average each year.
The net asset value of the fund is Rs 54.87 for the growth option, which means you can buy at this level. Better option to invest in the fund would be through the SIP route.
The largest holdings of the fund is Westlife Development, Graphite India, Hawkins Cookers and Relaxo Footwear. Among the best performing small cap mutual funds in India.
Franklin India Smaller Companies Fund
Franklin India Smaller Companies Fund is another fund that has performed well in the last few years The fund has generated returns of 28 per cent over the last 1 year, while the three year returns has been 20 per cent.
The top three holdings of the company include names like Finloex Cables, Equitas Holdings and Yes Bank. The fund has a very decent asset size of Rs 6,700 crores.
Since the NAV of the fund has seen fantastic growth in the last three years, we would recommend buying the fund through SIPs, rather than a lumpsum amount.
We are weary of suggesting small cap funds at the moment, unless through SIP given the sharp gains some small cap funds have made in terms of returns.
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