Best top 10 small cap mutual funds in India. All you need to know

Previously we discussed the Top 10 large cap mutual funds and mid-cap mutual funds in this article, we will discuss the top 10 small cap mutual fund

A small cap mutual fund is a fund that invests majorly in small-cap companies as per market capitalization. As per SEBI regulations, a small-cap fund is required to invest a minimum of 65% of its assets in small-cap companies through equity.

Advantages:

• Attractive Valuation: Small-cap funds invest in small-cap companies majorly, so there are various companies that are available at cheaper and attractive valuations.

• Very High Growth Potential: Companies in these funds have very high growth potential because of their size and flexibility to change. The companies have the potential to become mid & large-cap companies in the future.

Top 10 small cap mutual funds

S.No.	Fund Name	3-Yr Annualized Performance
1	Quant Small Cap Fund Direct Plan-Growth	40.21 %
2	Bank of India Small Cap Fund Direct-Growth	34.65 %
3	Canara Robeco Small Cap Fund Direct-Growth	34.26 %
4	Kotak Small Cap Fund Direct-Growth	31.30 %
5	Edelweiss Small Cap Fund Direct-Growth	29.93 %
6	Nippon India Small Cap Fund Direct Plan Growth Plan	29.19 %
7	Union Small Cap Fund Direct-Growth	29.14 %
8	Tata Small Cap Fund Direct-Growth	28.25 %
9	ICICI Prudential Small Cap Fund Direct Plan-Growth	27.38 %
10	Axis Small Cap Fund Direct-Growth	27.28 %

1. Quant Small Cap Fund Direct Plan-Growth

Fund analysis:

The fund has delivered an exceptionally good performance. The fund is investing predominantly in small-cap companies. The fund is rated 5-star by Morningstar.

The risk grade is high, and the returns grade is high. The fund follows a blended style of investing. The risk is spread across companies with the top 10 holdings consisting of 38.96%.

The fund has a high risk (measured by standard deviation) than the category average.

Pros	Cons
A top performer in its category. The fund captured the market well when it was rising.	Volatility is very high.

2. Bank of India Small Cap Fund Direct-Growth

Fund analysis:

The fund is rated 5-star by Morningstar. The risk grade is below average, and the returns grade is high. The fund has a beta of 0.84 indicating that the movement of the fund is less relative to the market movement.

The fund follows a growth style of investing. The fund has a low risk (measured by standard deviation) than the category average.

Pros	Cons
Risk Grade is below average. Well-diversified portfolio.	The fund has a high expense ratio.

3. Canara Robeco Small Cap Fund Direct-Growth

Fund analysis:

The fund has outperformed the benchmark over different horizons. The risk grade is average and the returns grade is high. The fund has a well-diversified portfolio invested across market capitalization.

The top 10 holdings consist of a total of 22.88%. The fund is rated 5-star by Morningstar. The fund holds a good risk-to-reward ratio. The fund has low risk (measured in standard deviation) than the category average.

Pros	Cons
The fund captured the market well when it was rising. Fund captured the market well when it was falling.	Less exposure to small-cap stocks.

4. Kotak Small Cap Fund Direct-Growth

Fund analysis:

The fund has outperformed the category average in terms of trailing returns over different horizons. The risk grade is above average and the returns grade is above average.

The fund has a beta of 0.95 indicating that the movement of the fund is quite closely relative to the movement of the market.

The fund has a well-diversified portfolio of growth stocks consisting of 72 companies spread over different sectors and market-cap companies. The fund has a high risk (measured in standard deviation) than the category average.

Pros	Cons
The fund has a favorable expense ratio. Fund captured the market well when it was falling.	Too much diversification may hamper the returns.

5. Edelweiss Small Cap Fund Direct-Growth

Fund analysis:

The fund has outperformed the category and the benchmark with good margins. The risk grade is below average and the returns grade is above average.

The fund has delivered consistent returns over different horizons and has a well-diversified portfolio of 75 growth stocks, investing across market capitalization.

The fund has low risk (measured in standard deviation) than the category average.

Pros	Cons
The fund captured the market well when it was falling. Relatively less downside risk.	Returns are above average.

6. Nippon India Small Cap Fund Direct Plan Growth Plan

Fund analysis:

The primary objective of the scheme is to generate long-term capital appreciation by investing predominantly in small cap companies and the secondary objective is to generate consistent returns by investing in debt and money market securities.

The risk grade is above average and the returns grade is above average.

The fund has a well-diversified portfolio across market capitalization and sectors. The fund has a high risk (measured in standard deviation) than the category average.

Pros	Cons
Consistent compounder. The fund has captured the market well when it rising.	The fund has a high expense ratio.

7. Union Small Cap Fund Direct-Growth

Fund analysis:

The fund is rated 3-star by Morningstar. The risk grade is below average and the returns grade is above average. The fund has a well-diversified portfolio across market capitalization and sectors.

The top 10 holdings of the fund consist of 29.08% only and the fund holds a total of 54 stocks in the portfolio. The fund has low risk (measured in standard deviation) than the category average.

Pros	Cons
Fund captured the market well when it was rising. The fund captured the market well when it was falling.	The fund has a high expense ratio.

8. Tata Small Cap Fund Direct-Growth

Fund analysis:

The fund has outperformed the category average marginally. The risk grade is low and the returns grade is above average. The fund has a beta of 0.86 indicating that the fund’s movement is less relative to the market movement. The fund has low risk (measured in standard deviation) than the category average.

Pros	Cons
Well-diversified portfolio.Relatively low risk.	Fund was not able to capture the market well when it was rising.

9. ICICI Prudential Small Cap Fund Direct Plan-Growth

Fund analysis:

The fund’s objective is to seek to generate capital appreciation by predominantly investing in small-cap stocks. The risk grade is above average and the returns grade is average.

The fund is rated 3-star by Morningstar. The fund has a balanced approach towards investing by investing in aggressive stocks along with maintaining less downside. The fund has a high risk (measured in standard deviation) than the category average.

Pros	Cons
The fund has high exposure to small-cap companies. Stable returns.	Exit Load of 1% before 1-Yr.

10. Axis Small Cap Fund Direct Plan-Growth

Fund analysis:

The fund is giving consistent returns over the long term with an attractive risk-to-reward ratio. The fund is 5-star rated by Morningstar. The risk grade is below average and the returns grade is above average.

The fund has a beta of 0.80 indicating that the movement of the portfolio has very less relation to the market movement. The fund has outperformed the category and the benchmark.

The fund has low risk (measured in standard deviation) than the category average.

Pros	Cons
Attractive risk-to-reward ratio.Consistent performer.	Fund was not able to capture the market well when it was rising.

Conclusion:

For any investor who wants to create wealth over a long-term horizon by taking high risk, investing in fast-growing new age companies. Investors investing in these funds should be cautious of high volatility during the investment journey

Consult an expert advisor to get the right plan for you