Despite perceived higher volatility and other risks in small-cap mutual funds, they delivered a 33.20 per cent return in a year, with HDFC, Quant, and Nippon India leading the way.
Small-cap mutual funds gave impressive returns in the one-year and three-year horizons, with 23 funds giving an average return of 33.20 per cent in the one year ended July 4, 2023, the Association of Mutual Funds in India (AMFI) data shows. Meanwhile, the three-year average returns were at an astounding 41.60 per cent. Now let's examine who are the top performers.
Top Performers in 1-Year Returns
Several small-cap funds saw remarkable performance over the past year. HDFC Small Cap Fund tops the charts with a whopping 46.49 per cent return. Closely behind are Quant Small Cap Fund at 43.54 per cent, Franklin India Smaller Companies Fund at 42.91 per cent, Nippon India Small Cap Fund at 41.47 per cent, and Tata Small Cap Fund at 40.65 per cent. Of the 23 funds whose 1-year average returns were around 33.20 per cent, nine performed above the average.
Impressive Consistency
Quant Small Cap Fund, Nippon India Small Cap Fund, and HDFC Small Cap Fund also emerged as the top performers in three-year returns. Although their consistent returns would appeal to investors, their past performance should not be construed as a guarantee for future returns, especially in small-cap funds.
In the three-year horizon, Quant Small Cap Fund secured the leading position with an impressive 59.10 per cent return. Nippon India Small Cap Fund followed closely at 47.82 per cent. HSBC Small Cap Fund, ICICI Prudential Smallcap Fund and HDFC Small Cap Fund are also among the top performers, with returns of 44.37 per cent, 44.55 per cent and 44.27 per cent, respectively. A total of 10 funds performed above the three-year average of 41.60 per cent.
Comparing Small Cap Funds With Other Categories
While small-cap funds have showcased strong performance, beating all other fund categories, analysing them alongside other fund categories is essential because small-caps are the most volatile than the rest.
Large-cap funds, the least volatile, provided an average return of 23.66 per cent in one year. Mid-cap funds, which have slightly higher volatility than the large caps, giving an average return of 26.33 per cent.
Multi-cap funds, which have a mix of large, mid, and small cap stocks in their portfolios gave an average return of 28.70 per cent in the same period. Flexi-cap funds, which provide flexibility to invest across market capitalisations, have generated an average return of 24.75 per cent, balancing returns and volatility.
Final Word
Small-cap funds have proven to be lucrative, but their infamous volatility makes them riskier in the eyes of investors. However, the AMFI data reveals that small-cap funds, as a category, delivered the highest overall returns, with only a few laggards, compared to other classes.
Multi-cap funds are the next best-performing category after small caps. For investors seeking a balanced investment approach, multi-cap funds could be a viable option. Investors can effectively manage the risks as these funds provide diversification and invest across market capitalisations.
Multi-cap funds are the next best-performing category after small caps. Investors seeking a balanced investment approach, multi-cap funds could be a viable option. Investors can effectively manage the risks as these funds provide diversification and invests across market capitalisations.
For more on mutual funds, readers may refer to India’s Best Mutual Funds 2023 Are Here, Time to Make an Informed Choice or the latest edition of Outlook Money