We want to begin with a warning. We are not recommending these small cap funds, but, just providing you information on their past returns. At this point in time, our own belief is that the markets in terms of price to earnings multiples for the Nifty are too high and allocation of fresh capital may not be desirable. Here are 5 small cap funds with returns of up to 90%:
Nippon India Small Cap Fund
Nippon India Small Cap Fund has given a returns of 109.95% in the last 1-year, which should probably be the best in its class. The 5-year returns from the fund is close to 20 per cent on an annualized basis, while the 3-year returns is at 11.37% on an annualized basis. The assets under management of the fund is more than Rs 12,000 crores and given that the fund invests in small cap, the risks are pretty high. The fund presently has about 97 per cent invested in stocks and the balance in cash. The portfolio of the fund comprises names like Deepak Nitrate, Tube Investments, Bajaj Electricals and Orient Electric.
Unlike largecap mutual funds, which have largest exposure to financials, Nippon India Small Cap's largest exposure is to the engineering industry, followed by Chemicals and FMCG.
Union Small Cap Fund
This fund has given a returns of 90% in the last 1-year. The three year returns on an annualized basis is 10.72 per cent, while the 5-year returns has been pegged at 14%. Interestingly, the short terms returns are stupendous, while the longer terms returns are lesser. This is largely because in the last 1 year, the indices have rallied significantly, since the national lockdown of March 2020 and strong global cues.
Union Small Cap Fund is a smaller fund, with assets under management of just Rs 425 crores. Among the stocks that are in its portfolio include names like Happiest Mind Technologies, Galaxy Surfacants, Teamlease Services etc. The net asset value under the growth plan is currently Rs 22.45.
SBI Small Cap Fund
This is another fund that has given robust returns of over 90 per cent in the last 1-year. In fact, the returns from the fund is 91.64 per cent to be precise. These are solid returns by any stretch. Small cap funds are the most volatile amongst all categories of funds and hence investors who have an appetite for risk only should invest. Should the markets for some reason fall, we may see a sudden collapse in the net asset value of these funds.
This is a much bigger fund in size with assets under management of nearly Rs 7,500 crores. SBI Small Cap Fund has investments in stocks like JK Cements, Elgi Equipments, V-Guard, Blue Star etc. If you are looking to buy into the fund under the growth plan, the same would be at Rs 86.86.
Axis Small Cap Fund
Axis Small Cap Fund has not given 1-year returns like Union Small Cap Fund or SBI Small cap Fund. In fact, the returns are lower at 80% over the last 1 year. That too is not bad at all. The 5-year returns are at 18 per cent on an annualized basis, which would be much better than what fixed yielding instruments had to offer.
Under the Axis Small Cap Fund, one can invest through the SIP route as well, just like for the above two funds as well. The minimum SIP amount is pegged at Rs 500, while the minimum investment is Rs 5000. Small cap funds have rallied significantly in the last 1-year and one cannot be sure, if there is any great upside that exists in the short to medium term.
HDFC Small Cap fund
HDFC Small Cap Fund has given a returns of 103 per cent in the last 1 year and has a three star rating from Value Research. The current assets under management of the fund is close to Rs 10,000 crores.
About the author
Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.