4 Top Small Cap Funds to Invest in 2019

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Concerning the time now, experts believe it is an opportune time to invest in small-cap stocks. They carry higher downside risk but have the potential to deliver superior return if the stock market performs well in a longer tenure. One should invest in small-cap funds for long-term and the allocation should be in line with the individual’s risk appetite. If you too wish to earn such humongous returns and have a stomach for high risk, then here are a few best small-cap mutual funds to plant your money in 2019.

Why Is 2019 a Good Year for Small Cap Fund Investment?

The market movement is often considered as a roller-coaster ride which has several ups and downs. However, if we analyze the year 2018 for the small caps, it has been a year where the movement was just in the downward directions, skipping the last two months of correction where a small recovery was seen. The reasons behind the downfall were many including rupee depreciation, rising crude oil prices, and an increase in the interest rates. Now, in the last 2-3 months, the crude oil has shown a huge drop in prices, the INR to USD valuations improved a bit, and the bond yields have also fallen, indicating towards a reversal in conditions.

To this, experts are hoping a reversal which can bring improvement in conditions of small caps. Volatility can be seen in the first half of 2019 due to general elections, but good growth is expected in the second half. Also, such funds are meant for long-term investment, so investing when the market is down indicated accumulation of more units at lower NAV, which further means good returns in the future.

Let’s know about the best small cap funds for 2019.

SBI Small Cap Fund

SBI Small Cap Fund has given returns of 15.45% during the 3 year period, which are greater than not only its category average of 8.81% but also higher than its benchmark return of 11.45%. The scheme generated a magnificent return of 28.95% in the past 5 years tenure, nearly 10% more than its category average and more than 13% than the return generated by its benchmark Nifty Smallcap 250 TRI.

The scheme does not take an aggressive stance and has a weight of just 62.80% to small caps in its portfolio. It has around 12% and 25% of its assets in large and mid caps, respectively. It is managed by Mr. R Srinivasan for the last 5 years. Considering its extraordinary performance, SBI Small Cap Fund is a 5-star small-cap fund which deserves a presence in your portfolio in 2019.

Reliance Small Cap Fund

This small-cap scheme is indeed one of the most loved schemes of the category which has delivered awesome growth to the investors in the past with returns since the launch of 17%. However, due to the sudden fall of small-cap stocks in the last year, investors have redeemed their investments in a panic. One of the plus points of the scheme is that it has managed to perform spectacularly in the long term and has also managed to cap the losses exceptionally better than the benchmark as well as the category in the last 1 year too. This shows that the management is really good and the strategies are working in favor of the scheme. Seeing the asset allocation of the scheme, Reliance Small Cap Fund is an equity category scheme, which has recently increased its investment in debt (6.88%) and cash instruments (3.74%) to deal with the volatility.

Coming to its risk parameter, Standard Deviation and Beta of the scheme are lower than the benchmark and more than the category’s average. If you have already invested in the scheme, carry on with your investments in this volatile phase and keep gathering the units at lower NAV. In case you haven’t invested in it yet, you can consider this star player to earn good returns in the long run.

L&T Emerging Businesses Fund

This scheme of L&T Mutual Fund has just completed three years of its existence in the world of mutual funds but has indeed made a special place in the industry as well as the heart of the investors. It has consistently proved its will among all others by beating both its benchmark and category’s average by a convincing margin.

The fund manager Mr. Soumendra Nath Lahiri doesn’t believe in following any fixed investment style, whether it is growth or value investing. However, he picks good quality stocks that offer growth in the long term. It predominately invests in mid and small cap stocks with the allocation of 52.14% and 47.23%, respectively. Such high inclination in mid-cap stocks is a rare thing to see in this category of funds. If what you are looking for is a perfect balance of mid-cap and small-cap stocks, then investing in L&T Emerging Businesses Fund Growth is an ideal choice to make.

HDFC Small Cap Fund

It wouldn’t be wrong to title HDFC Small Cap Fund as one of the most experienced funds of the category which was launched on April 3, 2008. It has developed a whopping asset size amounting to Rs. 6164 crore as on Jan 31, 2019. In terms of its trailing returns, HDFC Small Cap Fund Growth has given an average return of 13.84% on an average, whereas the five and ten years returns are 20.14% and 21.24%, respectively as on February 06, 2019.

The SD and Beta of the fund as well as the category are almost equal in terms of volatility. During the positive market cycle, the fund has given better returns than its category, whereas, during the negative market cycle, the fund has gone less negative than its category. These are all signs of strong fund management done by Mr. Chirag Setalvad and Mr. Amar Kalkundrikar.

The Final Take

Looking at the above information, it’s clear that the above mentioned small-cap funds are a great pick for a long-term investment now and have never disappointed investors. Over the years, they have shown a spectacular performance and looking at their current investment & asset allocation styles, a similar growth can be expected in the future too. However, one must be prepared to dodge short term fluctuations and volatility. The entire focus should be on the long-term fruits that they will get to enjoy.

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