Top 10 Small-Cap Mutual Funds that Outperformed their Benchmarks Over Five Years
An analysis of the performance of small-cap mutual funds over the last five years revealed that 10 schemes outperformed their respective benchmarks. Among the 19 small-cap funds evaluated during this period, these top performers stood out for delivering superior returns.
Leading Small-Cap Funds and their Performance
The Bank of India Small Cap Fund outperformed its benchmark, providing a five-year return of 36.51%, in contrast to the 30.33% delivered by the Nifty Smallcap 250 – TRI index.
Similarly, the Canara Robeco Small Cap Fund returned 33.27%, beating its benchmark of 30.33% in the same period. The DSP Small Cap Fund, benchmarked against the BSE 250 Small Cap – TRI index, provided a return of 30.01%, exceeding its benchmark return of 29.57%.
Funds like Edelweiss Small Cap Fund and HSBC Small Cap Fund gave returns of 32.40% and 30.57%, respectively, while outperforming the benchmark, which returned 30.33%. The Kotak Small Cap Fund also returned 30.57%, slightly higher than its benchmark, which stood at 30.33%.
The largest small-cap fund in terms of assets under management, the Nippon India Small Cap Fund, generated a return of 34.95%, outperforming the Nifty Smallcap 250 – TRI index’s 30.33%.
Both Quant Small Cap Fund and Tata Small Cap Fund gave excellent returns compared to their respective benchmarks. The Quant Small Cap Fund returned as high as 45.30%, whereas the Tata Small Cap Fund provided a return of 31.29%, exceeding the benchmark’s 30.33%.
The Invesco India Smallcap Fund also delivered a five-year return of 31.11%, outperforming its benchmark return of 29.57%.
Funds that Underperformed
While several funds excelled, some underperformed their respective benchmarks over the same five-year period. For example, the Aditya Birla SL Small Cap Fund gave a return of 23.32%, underperforming its benchmark return of 29.57%.
The Axis Small Cap Fund and the Franklin India Smaller Companies Fund provided returns of 27.10% and 28.86%, respectively, both underperforming the benchmark return from the Nifty Smallcap 250 – TRI of 30.33%.
Other notable underperformers included the HDFC Small Cap Fund, which offered 28.78% compared to its benchmark’s 29.57%, and the SBI Small Cap Fund, which delivered 26.77%, trailing behind its benchmark’s 29.57%.
Funds like the ICICI Prudential Smallcap Fund, LIC MF Small Cap Fund, Sundaram Small Cap Fund, and Union Small Cap Fund also failed to exceed their benchmarks.
Overall Sector Performance
On average, the 19 small-cap funds analyzed offered returns of 30.75% over the last five years. The benchmark indices Nifty Smallcap 250 – TRI and BSE 250 Small Cap – TRI delivered returns of 30.33% and 29.57%, respectively.
Suitability for Investors
Small-cap funds are usually recommended for aggressive investors who have a high-risk appetite and a long investment horizon. These schemes hold the potential to generate significantly better returns over a longer period but involve higher risks. SEBI regulations state that small-cap schemes must invest in companies ranked below 250 based on their market capitalization.
This analysis included all small-cap funds with at least five years of market presence, focusing on regular growth options, and calculating returns for the past five years. Investors are advised to evaluate their risk tolerance and financial goals before investing in small-cap schemes.
