Historical data points out that when inflows in mutual funds rise after a period of stagnant inflows or outflows, a large part of the money finds its way in small cap funds, the idea being that fund managers tend to spot fresh ideas in this universe. Investors who are willing to take a bit of risk and gain relatively better than the large-cap schemes in the long-term can consider investing in small cap schemes.
Among small-cap schemes that have been in existence for over a decade, SBI Small Cap is a distinguished performer especially in the past five-year period, beating its peers by a considerable margin. In the past three-year and five-year periods, the scheme has delivered returns of 16.1% and 22.5% respectively, while its peers have given average returns of 10% and 15%, respectively over the same period.
Presently, the scheme accepts investments only through systematic investment plan (SIP) or systematic transfer plan (STP). This reduces volatility and helps in constant rebalance of the portfolio. Midsized companies make up 14% of the scheme’s portfolio, while 4% is invested in large-sized companies. In terms of themes, the scheme’s fund manager is invested in companies that are expected to benefit from economic recovery and improvement in consumer discretionary sales. These themes tend to do well only in the long-term (minimum five years), a key reason being the fund manager’s stock selection approach is sector-specific rather than stock-specific.
Portfolio change (past 6 months)
|New Entrants||Complete Exits||Increase in Allocation|
|Agro Tech Foods||Avanti Feeds||V2 Retail|
|BHEL||Camlin Fine Sciences||Relaxo Footwears|
|Carborundum Universal||ICICI Securities||Kewal Kiran Clothing|
Returns (in %)
|Period||CAGR return||SIP CAGR return||Market cap fund-
Average CAGR return (%)
Returns peer comparison (in %)
|Axis Small Cap Fund||7.11||12.91||14.99|
|Franklin India Smaller Companies Fund||-9.54||8.17||14.80|
|HDFC Small Cap Fund||-7.26||16.51||15.49|
Source: Accord Fintech, Complied by ETIG Database
Rupesh Bhansali, head-mutual funds, GEPL Capital
SBI Small Cap has performed consistently well in the past five years. Fund manager R Srinivasan has demonstrated good stock-picking ability which is reflected in the scheme’s performance. The portfolio is well-diversified with just 45 companies. For long-term investors willing to risk and believe in high risk-high return market wisdom, this scheme serves well.