Best Small Cap Mutual Fund In 2023

Mar 12th 2024
Mutual Fund

Best Small Cap Mutual Fund, If you are looking to make big gains by investing in the stock market but don’t have detailed knowledge of stock investments, mutual fund investment emerges as the most preferred choice of today’s investors. In recent times, the popularity of mutual funds has skyrocketed as a large number of investors invest in mutual funds with unprecedented levels of ease. The best part of mutual funds investment is that one can choose from different types of mutual funds basis his risk-bearing capacity, investment objective, and investment capability. However, among different types of funds, small cap mutual funds are known to offer the best returns despite carrying higher risk. Let’s get to know more about them below.

What Are Mutual Funds?

Put simply, a mutual fund can be defined as a collection of funds deposited by a large number of investors and the accumulated money in invested in various investment avenues like stocks, bonds, commodities, currencies, etc. A mutual fund is managed by a fund manager who is skilled and experienced in stock investment. Mutual funds investment is a great option for those investors who want to leverage the momentum of stocks but don’t carry the knowledge required for the same.

Read More- Mutual Funds and Taxation: Key Considerations for Investors in 2023

What Are Small Cap Mutual Funds?

Though the basic structure of small cap mutual funds are similar to other types of mutual funds, these funds are bound to invest a minimum of 65” of the invested amount in the equity stocks belonging to small-cap firms. These companies refer to firms that have a market capitalization lesser than 250 biggest companies listed in the stock market of India. However, a company with a market capitalization of Rs. 5000 crore is considered a small cap company.

However, the Securities and Exchange Board of India (SEBI) follows a ranking-related description of small cap funds in regard to mutual funds. All equities tend to be indexed plunging on market cap as per the new definition, which has become applicable since the beginning of 2018. On the other hand, large cap stocks are termed as the top 100 stocks whereas mid-cap stocks attain a rank between 101 and 250, while small-cap stocks come with a rank lower than 251.

Features Of Small Cap Funds

  • Small cap funds primarily invest their money in small cap stocks and an extremely smaller portion is invested in higher market cap segments.
  • For investors investing in small cap funds, liquidity can be an issue. There are hardly a few small cap fund that feature this service.
  • A large number small cap mutual funds have been known to stop new fund inflows to avoid falling short of choice of small caps to invest in.
  • Small cap stocks are defined as small companies with a singular business like with little or no scope for diversification.
  • Small cap mutual funds tend to carry a higher risk than mid-cap funds and the large cap funds. In addition, their price changes can be significant unstable.
  • Small caps typically outperform large cap funds over a longer period of time due to stocks in their portfolio having higher growth potential.

Read More About Topics Given Below-

Comparative Analysis: Best FD Rates Offered by Banks in 2023

How to Evaluate and Select Mutual Funds for Portfolio Diversification in 2023

Why To Invest In Small Cap Funds?

Who should invest their money in small-cap mutual funds? If this is what you are looking for, here is what you should know.

If you are looking for long-term capital appreciation, small cap mutual funds are meant for you. Due to their high level of volatility, they are best suited for investors who want to stay for at least 7 years or more. Small Cap Funds tend to be quite volatile in the short term, so investors should consider investing in these schemes only if they are planning to stay invested for 7 years or longer. These mutual funds carry an unmatched potential of accruing major returns over an extended period of time. However, in the case of long-term investment, it is advisable for investors to keep a small amount of exposure to these equity funds due to the likelihood of superior return volatility.

If you are one among those who have a high risk-bearing capacity, small cap mutual funds have the extreme potential of driving fabulous growth. As far as outcome is concerned, these techniques have an unrivalled potential for generating tremendous gains. However, this large exposure to smaller businesses also entails a significant risk because these businesses' performance can be greatly influenced by shifting market conditions. These mutual funds are characterized by their high risk and potential for significant gains, hence these schemes are only recommended for investors with high risk-taking capabilities.

Best Small Cap Mutual Funds in 2023

Top small cap mutual funds in India are given below that you can choose to invest in 2023-

             Scheme Name

                 AUM (Rs Crore)

Nippon India Small Cap Fund


SBI Small Cap Fund


HDFC Small Cap Fund


Axis Small Cap Fund


DSP Small Cap Fund


HSBC Small Cap Fund


Kotak Small Cap Fund


Franklin India Smaller Cos Fund


ICICI Pru Smallcap Fund


Canara Rob Small Cap Fund



1. How Much Amount Should I Invest In Small Cap Mutual Funds?

Small Cap Funds that feature a considerable allocation to equities with smaller market caps, are highly likely to be affected by economic downturn. Small Cap Funds should therefore only be a part of an equity mutual fund portfolio's "Satellite" portfolio. Consider keeping your equity mutual fund portfolio's exposure to small cap funds between 10-15%.

2. Which Is The Best Small Cap Mutual Fund Should I Invest In?

SBI Small Cap Fund was launched in September 2009. It is the second-largest fund in the Small-cap segment. The fund invests the allocated funds in smaller firms with emphasis on unparalleled strong growth. Additionally, it looks for temporarily underrated stocks that ready for adoption. The fund outperformed its benchmark by a significant margin of about 7-8 percentage points throughout the periods of 5 and 7 years.

3. How Much Return Can I Expect From My Investment In Small Cap Mutual Funds?

In general, small cap funds have accrued an average return of 20.01% every year. 39.04% and 24.15% p.a., for 5 years.

The Conclusion

For those who are willing to take risks and don’t hesitate from leveraging the market volatility, small cap mutual funds in Delhi are the best choice. In fact, there are numerous big companies out there that once belonged to small cap segment. In today’s fast-paced business environment, these small cap stocks carry tremendous growth potential which makes them attractive to young investors who are ready to take risks and make big gains out of their investments, Contact Investkraft For More Services.


Subscribe to our newsletter

Related Post

Reach out to our Experts if you have any Doubts

Like the best things in life, Consultations @InvestKraft are free

Drop a Mail or give us a Missed Call & Begin your Investment Journey here


Subscribe to our newsletter