5 small-cap mutual funds that have given over 42% returns in a year

5 Top Small-cap Mutual Funds: The fascination with small-cap mutual funds is high because they are the first to rise when the market goes up. At a time when the market is scaling new peaks every other day, a number small-cap mutual funds have been delivering good returns. Many of them are comfortably beating their benchmarks, Nifty Smallcap 250 and others. The latest data from the Association of Mutual Funds in India (AMFI) also indicates the growing interest of investors in small-cap mutual funds.

In November, small-cap mutual funds had an inflow of Rs 3,699 crore, as per AMFI data. It is yet to be seen if the small-cap mutual funds will continue their rally in the upcoming year, but for this year, there are many of them that have delivered annualised returns of 40 per cent and more. 

Adhil Shetty, CEO, Bankbazaar.com, says, "Small-cap funds are on the verge of completing another calendar year of 30%+ returns. These are extraordinary returns. So it’s a good time to remember that returns can also be cyclic. Small-caps can also go through periods of underperformance like the calendar years of 2018, 2019, and 2022, and the initial months of 2020. Small-cap funds invest in companies ranked 251 and above in terms of market capitalisation. This is the riskiest segment of the market with high volatility though the potential for great returns can also be seen." 

He further says, "There will be a recency bias for small-caps but it’s worthwhile remembering that when market corrections happen, the riskier asset classes tend to correct the most. Therefore, it’s best to not be swayed by recent performance but instead consider long-term prospects. Equity investments require long-term horizons of preferably 3-5 years. But small-cap equity may require an even longer horizon of 5-7 years to account for periods of high volatility. A longer horizon gives you a much better chance of earning the higher returns you’re taking the higher risks for. Novice investors should avoid timing the market and let SIPs do their work through high-quality mutual funds."

In this write-up, we will tell you about five of such small-cap mutual funds.

Mahindra Manulife Small Cap Fund

With 54.85 per cent returns in a year, this direct growth plan tops the list of the top 5 small-cap equity funds.

The fund has outpaced its benchmark index, S&P BSE 250 Smallcap TRI, which has grown 38.18 per cent in the last one year.

Its asset under management (AUM) stood at Rs 2659.59 crore as on December 14, while the net asset value (NAV) was Rs 15.52 for the direct plan.

The fund's expense ratio is 0.14 per cent.

The high-risk fund has 94.11 per cent of its investment in equities, out of which 57.66 per cent is in small caps, 14.49 per cent is in mid caps, while 10.04 per cent in large caps.

The fund's top stocks in its portfolio are Coal India Ltd., Century Textile & Industries Ltd., and Godrej Industries Ltd.

Had one invested a lump sum of Rs 10,000 one year ago, it would have turned into Rs 15444.30 in today's time.

Bandhan Small Cap Fund

With a 48.39 per cent returns in direct plan in one year, the fund from IDFC Mutual Fund is second in the list.

The fund has outpaced its benchmark index-S&P BSE 250 Smallcap TRI.

The fund's AUM as on December 14 present stood at Rs 3401.93 crore, while the NAV for the small-cap mutual fund's direct plan stood at Rs 34.17.

The fund's expense ratio is 0.33 per cent against the average category of 0.62 per cent.

The Crisil 3-star-rated fund has 90.36 per cent of its investment in equities with 47.67 per cent in small caps, 14.59 per cent in mid caps and 6.62 per cent in large caps.

Apar Industries, Arvind Ltd, and Rural Electrification Corporation Ltd are its main stocks.

A lump sum investment of Rs 10,000 a year ago would have given the investor Rs 14,838.90 in the current value. 

Franklin India Smaller Companies Fund

With a return of 45.44 per cent in one year, this small-cap mutual fund from the house of Franklin Templeton Mutual Fund is third on the list of top small-cap performers.

The fund had an AUM of Rs 11,100.65 crore as of December 14 and an NAV of Rs 160.46.

The fund's expense ratio is 0.99 per cent against the category ratio of 0.65 per cent.     

The Crisil 5-star-rated fund has 92.82 per cent of its investment in equities.

The biggest chunk of its investment is in small caps at 53.86 per cent, 2.94 per cent in mid and 2.44 per cent in large caps.

It has a 0.46 per cent investment in government securities.

The top stocks in its portfolio are Brigade Enterprises Ltd., Equitas Small Finance Bank, and Multi Commodity Exchange of India.

ITI Small Cap Fund

With a 45.57 per cent return in the last one year, the fund from the house of ITI Asset Management Ltd., stands fourth in the list.

The fund's AUM as of October 14 stood at Rs 1913.02 crore and the NAV size for its direct plan was Rs 23.02.

The expense ratio is 0.24 per cent against 0.65 per cent in the category.

The fund has 94.53 of its investment in equities.

Out of it, 54.53 per cent are in small-cap stocks, 11.9 per cent is in mid-cap stocks, while 4.74 per cent is in large-cap stocks.

Its biggest stock holdings are in Jindal Stainless Ltd, KPIT Technologies, NCC Ltd and Kirloskar Oil Engines Ltd.

A Rs 10,000 lump sum investment a year ago in the fund would have become Rs 14576.

Nippon India Small Cap Fund

The fund with an AUM of Rs 42,452.51 crore stands fifth in the list.

It has given 42.32 per cent returns in the last one year.

The NAV size for the fund is Rs 150.17.