DSP Small Cap Fund Now Open for Fresh SIP/STP Investments
The wait is finally over. One of the star performers from the small cap space is now back on track to compete. Well, yes, we are referring to DSP Small Cap Fund. The fund was closed for subscription from February 2017, and before that in August 2016, the scheme has restricted lumpsum investments to ₹1 lakh per person. But now, it has decided to resume investments through SIP and STP with effect from September 3, 2018. Let’s see what it has brought for you!
Table of Content
DSP Small Cap Fund was earlier known as DSP BlackRock Micro Cap Fund before re-categorization. However, due to the split of DSP and BlackRock with DSP buying the entire ownership of the company, the scheme will now be known with the name of DSP Small Cap Fund.
A lot has been changed in the name of this highly popular small cap fund which has a track record of creating huge corpus for its investors, but the question here is whether there is any change in the game of the scheme. Is it still worthy of your investment? Let’s find out!
Facts About DSP Small Cap Fund
| Category | Small Cap |
| Benchmark | S&P BSE Small Cap TRI |
| Launch Date | 6/14/2007 |
| Asset Size | Rs 5,351 crore(As on Jul 31, 2018) |
| Fund Managers | Jay Kothari, Resham Jain, and Vinit Sambre |
| Expense Ratio | 2.22%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 1,000 |
| Minimum SIP | Rs 500 |
| Exit Load | 1% for redemption within 365 days |
Why was it Closed for Inflows?
It was difficult for the fund managers to deploy huge flows of money in a shorter time period in the small-cap category. Further, there was the unavailability of enough attractive opportunities to deploy the flows that the scheme was getting. Liquidity was another constraint which was responsible for shutting down of fresh subscriptions in several small cap schemes.
Performance Analysis: DSP Small Cap Fund (G)
| Trailing Returns | ||||||
|---|---|---|---|---|---|---|
| 1 Year | 3 Years | 5 Years | 10 Years | |||
| Benchmark: S&P BSE Small Cap | 9.71% | 16.70% | 28.11% | 10.90% | ||
| DSP Small Cap Fund (G) | 2.51% | 13.53% | 34.74% | 20.64% | ||
| Return: As on August 29, 2018 | ||||||
| Rolling Returns (with the gap of 6 months) | ||||
|---|---|---|---|---|
| Dec-2013 to Dec -2016 | June 2014 to June 2017 | Dec-2014 to Dec -2017 | June-2015 to June - 2018 | |
| Benchmark: S&P BSE Small Cap | 25.92% | 15.23% | 22.72% | 13.72% |
| DSP Small Cap Fund (G) | 44.97% | 31.17% | 25.30% | 13.59% |
Going with the past record of this scheme of DSP Mutual Fund, DSP Small Cap has outperformed both its benchmark as well as the category in past 5 years and 10 years but couldn’t do well in past one and three years. The past 5 year return of 34.74% is strong evidence of the outperformance of the fund beating both its category and benchmark’s average which have given 30.20% and 28.11% as on August 29, 2018.
Risk Analysis: DSP SmallCap Fund
| Particulars | SD | Beta | Sharpe | Max Drawdown | Upside | Downside |
|---|---|---|---|---|---|---|
| Benchmark: S&P BSE Small Cap TRI | 19.52 | NA | 0.54 | -19.23% | 100 | 100 |
| Category | 18.46 | 0.92 | 0.58 | -18.86% | 94 | 90 |
| DSP Small Cap Fund | 18.82 | 0.92 | 0.47 | -19.78% | 91 | 94 |
- Analyzing the past 3 years’ Standard Deviation and Beta coefficient of the scheme(both denoting the market volatility), one can tell that the risk that the scheme possesses is about the same as its category and benchmark.
- Looking at the Sharpe Ratio (which measures the risk to reward ratio) of the fund, i.e., 0.47 against the benchmark’s and category’s average of 0.54 and 0.58, it can be clearly stated that the scheme is giving higher returns in the long run even after taking less per unit risk than its category as well as the benchmark.
- Finally, coming to the Maximum Drawdown of the fund, which is 19.78% against the category’s and benchmark’s value of 18.86 and 19.23 percent, it can be said that the scheme involves a little greater degree of risk than the other two.
Portfolio Allocation: DSP Small Cap Growth Plan
1. Market Capitalization
At present, the scheme has the maximum investment in small-cap stocks, i.e., 67.70 percent, 31.93% in mid-cap stocks, and the rest 0.37% in micro caps. Category wise, this allocation seems to be perfect.
The fund manager, Mr. Vinit Sambre plies the bottom-up and buy and hold approach for stock picking. He scouts for growth-oriented companies who are market leaders that have sustainable competitive advantages over their peers.
2. Sector Allocation
| Sectors | Allocation | |
|---|---|---|
| Cyclical | ||
| Basic Material (Agriculture, Chemical, Metal & Mining, Steel, Building Materials) | 28.62% | |
| Consumer Cyclical (Auto related industries, Travel & Leisure, Marketing Cos, Apparel & Furniture Mfg Cos) | 32.57% | |
| Financial Services | 8.17% | |
| Real Estate | 0.00% | |
| Sensitive | ||
| Communication Services | 0.00% | |
| Energy | 0.00% | |
| Industrial | 7.09% | |
| Technology | 9.96% | |
| Defensive | ||
| Consumer Defensive | 3.85% | |
| Healthcare | 7.85% | |
| Utilities | 1.89% |
The fund managers are quite conscious when it comes to valuations and quality stocks, as they do not compromise on either of the parameters to attain quick profits. It has a low turnover ratio of 16% which is a testimony to the success of its buy and hold strategy. Thus, the investment of the fund makes it a good pick, especially in a shaky market.
SIP and Lumpsum Investment in DSP Small Cap
| 3-years SIP Return of Rs. 1000/per month | ||||
|---|---|---|---|---|
| Investment | Growth Value | Absolute Return | XIRR | |
| Benchmark: S&P BSE Small Cap | 36000 | 48920 | 35.89% | 20.93% |
| DSP Small Cap Fund (G) | 36000 | 46427 | 28.96% | 17.21% |
| 3-years Lumpsum Return on Investment worth Rs. 100,000 | ||||||
|---|---|---|---|---|---|---|
| Investment | Growth Value | Absolute Return | CAGR | |||
| Benchmark: S&P BSE Small Cap | 100000 | 160019 | 60.02% | 16.93% | ||
| DSP Small Cap Fund (G) | 100000 | 157674 | 57.67% | 16.36% | ||
| Return: As on March 31, 2018 | ||||||
Conclusion: Should You Invest in it?
Going with the objectives of the scheme, DSP Small Cap Fund- Regular Plan is found suitable for:
- Aggressive investors with a High-Risk appetite.
- Investors who are looking forward to generating High Returns whilst being exposed to high volatility.
- Investors with a Long-term Investment Horizon of around 5 years or more.
Now, as per the recent views of the experts, broad valuations in the small cap space have come off. And, volatility could be there in the space over the next one year. Therefore, investors could make the maximum from this volatility by investing in this small cap fund using SIP method. Investors who are willing to stay invested for at least 5-7 years should invest in this fund now, however, they should always have the patience to hold investment when there is short-term volatility in the market.
Recommended Reads:
- Looking for the best performing small cap funds for wealth creation, read Top 5 Best Small Cap Funds
- Start with just Rs 1000. Here are the best schemes to invest in Best Mutual Funds to Start SIP with Rs 1000
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Best Funds
| Top funds | 1M Return | 6M Return | 1Y Return | 3Y Return | 5Y Return |
|
|
|---|---|---|---|---|---|---|---|
| SBI Small Cap Fund - Regular Plan - Growth | 1.12% | 21.96% | 39.04% | 25.1% | 30.45% | Invest | |
| Nippon India Small Cap Fund - Growth Plan - Growth Option | 1.45% | 26.27% | 51.26% | 33.24% | 38.8% | Invest | |
| HDFC Small Cap Fund - Growth Option | 2.23% | 16.9% | 37.8% | 27.36% | 30.25% | Invest |