Listed companies are generally categorised into three segments - large-cap, mid-cap and small-cap. Among these three categories, small-cap companies have the potential to offer the highest return on your investment. However, they’re very risky, and their price movements can at times be too volatile.
The best way to invest in such companies is through a small-cap mutual fund. These funds invest in a basket of different small-cap companies across multiple sectors. This reduces investment risk through diversification.
If you’re interested in investing in such mutual funds, then here are some of the best-performing small-cap mutual funds that you can consider.
With a fund size of about Rs. 23,756 crores, the Nippon India Small Cap Fund is one of the largest small-cap mutual funds in India. Established in 1995, the fund invests in companies across 11 different sectors. Capital goods, financials, chemicals and consumer staples are the top sectors that the fund invests in.
With a three-year annualized return of around 40.29%, the fund is one of the top performers and has consistently delivered returns that have outperformed the broad market. As of March 13, 2023, the Net Asset Value (NAV) of the fund was Rs. 100.15.
The Quant Small Cap Fund is easily one of the best-performing small-cap funds in India. Over the past three years, it has delivered an annualized return of 60.05%, which is currently the highest in the country. The total fund size is currently Rs. 2,870.43 crores, which it has invested in over 9 different sectors.
Some of the key sectors that the fund has invested in include consumer staples, financials, metals and mining and construction. As of March 13, 2023, the Net Asset Value (NAV) of the fund was Rs. 148.51.
Introduced in 1987, the SBI Small Cap Fund invests about 65% of its total fund size of Rs. 15,348.09 crores in small-cap companies. The fund has diversified its portfolio by investing in companies across 9 sectors. Services, capital goods, consumer discretionary and chemicals are the top 4 sectors where the fund has more than 10% allocations.
The SBI Small Cap Fund’s three-year annualized return is around 32.19%, putting it on the list of the best-performing small-cap mutual funds in the country. The Net Asset Value of the mutual fund as on March 13, 2023, was Rs. 122.78.
Established in 1999, the HDFC Small Cap Fund invests in fundamentally strong small-cap companies across sectors like services, financials, capital goods, chemicals, and 5 others. In terms of size, the fund currently has over Rs. 14,649.44 crores.
Some of the top small-cap companies that the fund has invested in include Sonata Software, Firstsource Solutions and eClerx Services. The three-year annualised return of the HDFC Small Cap Fund is a healthy 36.37%, which makes it one of the best-performing small-cap funds in India. As of March 13, 2023, the NAV of the fund was Rs. 88.69.
A scheme owned by Tata Mutual Fund, the Tata Small Cap Fund was established in 1995. Currently, the total fund size is around Rs. 3,117.26 crores, which is invested in 9 sectors including services, financials, chemicals, consumer staples and capital goods, among others.
The fund has performed well over different market conditions with the three-year annualized return being around 36.96%. One of the major highlights of the Tata Small Cap Fund is its low Net Asset Value (NAV), which is around Rs. 25.28 as of March 13, 2023.
The ICICI Prudential Small Cap Fund was launched in 1993. The fund size is currently at Rs. 4,598.77 crores, which is invested in 8 different sectors. Services, healthcare, capital goods and chemicals are a few of the top sectors where more than 10% allocated has been made.
Over the past three years, the ICICI Prudential Small Cap Fund has delivered annualized returns of about 34.68%. At just Rs. 57.38 as of March 13, 2023, the NAV of the fund is also low and affordable, making it one of the best-performing small-cap mutual funds in India.
The above 6 mutual funds are the top small-cap funds that you can consider investing in 2023. That said, keep in mind that investing in such funds is risky and that you may not always get the returns that you expect.
If you’re looking to invest in small-cap mutual funds, you need to first open a demat account in your name. Contrary to popular opinion, opening one is very easy and can be completed online. All you need to do is simply visit the Motilal Oswal website, fill out an online application and submit it. It is that simple. Once your account is activated, you can proceed to invest in mutual funds, upcoming IPOs and other securities.