Nippon India Small Cap Fund Review 2025: Complete Guide

Did you know that the Nippon India Small Cap Fund has climbed to the top of the small cap mutual fund charts? Yes, it is true. With its impressive AUM of over Rs 61,973 crore and strong five year returns of 23.13%, this mutual fund has achieved this milestone. Managed by Samir Rach at Nippon India Mutual Fund, this equity fund has often outperformed its peers and benchmark, setting a high standard.

But the real question for investors today is, "Is the Nippon India Small Cap Fund a good investment in 2025?" Well, if you are aiming for long-term growth and can handle the higher risks associated with small caps, this fund with proven records and a broad portfolio is a solid choice for your investments this year.

Want to know more? This review will examine the fund’s strategy, strengths and other key details to help you decide if it is a good addition to your portfolio in FY2025. So, let us dive in.

Nippon India Small Cap Fund Overview

The Nippon India Small Cap Fund is one of the equity funds managed by the Nippon India Mutual Fund AMC. The fund house launched it on September 16, 2010. This mutual fund mainly aims for long-term capital by investing in small companies with high growth potential, but it also has a high risk level.

As of August 2025, the fund actively manages assets worth Rs 64827.61 crores (AUM). The fund follows a buy-and-hold approach and has delivered an average annualised return of approximately 25.26% since its inception and 23.13% in 5 Years, outperforming its benchmark (Nifty Small Cap 250 TRI).

The mutual fund's net asset value (NAV) was Rs 192 as of September 22, 2025. It offers two investment methods: a lump sum and an SIP (Systematic Investment Plan). The minimum investment amount for a lump sum is Rs 5,000, while the minimum for the best SIP plan is Rs 100 per month.

Must Read: Best Mutual Funds to Invest in 2025: Low-Risk Options for High Return

In the next part, we will understand this fund's investment style to check if it aligns with your investment goals.

Nippon India Small Cap Fund Investment Strategy

Samir Rach (Fund Manager) and his team employ an investment strategy focused on small-cap stocks that are currently undervalued but have strong growth potential over the long term. The fund implements a buy-and-hold approach by buying stocks of high-growth small companies early in their lifecycle and holding them as they grow while actively managing the portfolio to mitigate risks.

The fund also employs a GARP (Growth at a Reasonable Price) strategy, investing in companies with high growth potential but at a reasonable valuation or cost. This flexible strategy allows investments in a mix of growth and value stocks based on market cycles.

The Nippon India Small Cap Mutual Funds takes a bottom-up approach to stock selection and applies a light top-down overlay to sector alignment.

With a diversified portfolio of more than 230 stocks and low single-stock exposure (2%), it reduces risk while keeping turnover moderate at 18%. The fund actively shifts allocations within small caps, adapting to market cycles.

Let us analyse the performance of this fund and find out if it is appropriate for your goals.

Performance Review of Nippon India Small Cap Fund

Nippon India Small Cap Fund has delivered strong returns over the long term despite short-term market volatility. Check out the rolling returns and SIP returns of this Mutual Funds here:

Rolling Returns

The Nippon India Small Cap Fund has consistently surpassed its benchmark with 27.61% 3-year returns and 23.13% 5-year returns. In terms of consistency, the fund shows better consistency than its benchmark, with scores of 81.72% and 67.67% over 3 and 5 years, respectively. This performance indicates the fund's stability across medium and long-term horizons and strong fund management against market volatility. Refer to the graph below for a clear understanding:

The above graph clearly shows the fund's growth potential, with its rolling returns surpassing the benchmark over time.

SIP Returns

The Nippon India Small Cap Fund's SIP returns also beat its category average over 3 and 5 years, with 19.1% and 24.43% SIP returns, respectively. However, the fund has shown a mixed performance against its benchmark. It did not cross the benchmark for the 3-year returns, but showed a good performance over the long term by beating its benchmark over 5-year SIP returns. Check out the graph below:

 

The graph shows that the fund delivers strong and stable long-term performance with its SIP investments, making it suitable for a long-term perspective.

Pro Tip: Use a SIP Calculator to estimate the future value of your SIP investments.

Now, we will check out the profile of the one who manages the fund with his unique perspective.

Also Read: Nippon India Small Cap Fund: Delivers 26.19% SIP Return 

Fund Manager Profile of Nippon India Small Cap Fund

A good management team and strategy are what decide how a fund will perform in the market. The planner and organizer behind the success of the Nippon India Mutual Fund is Samir Rach, who is leading a strong management team for the fund's growth.

Managing this mutual fund since January 2017, Samir Rach has 25 years of experience in the equity markets and an expertise in small and mid cap investments with a focus on identifying high growth potential but undervalued stocks.

He proved his expertise and ability in 2020 by minimizing losses during the COVID-19 pandemic, making him a perfect fit for managing a high-risk but high-growth small cap mutual fund. With his team's research capabilities for stock selection and his own experience, he increased the fund's AUM from Rs 3000 crore in 2017 to over Rs 64827.61 crores in 2025.

Next, you will closely explore the portfolio and the composition of this mutual fund.

Analysing Nippon India Small Cap Fund Portfolio Composition

The composition of a fund's portfolio shows how it will perform in the worst and the best market conditions. Here is the detailed overview of the fund's portfolio:

Market Cap Allocation

The Nippon India Small Cap Fund mainly focuses on mid-caps, offering a balance of growth and stability with 51.21% allocation, followed by small-caps for higher return potential and some volatility with 31.83% allocation. Lastly, 16.96% in large-caps, providing a cushion of stability and liquidity. Look at the graph for a clear picture:

This blend shows the fund's diversified, growth-focused view while managing risk by investing in all three market caps.

Asset Allocation

The Nippon India Small Cap Fund reflects an aggressive, growth-focused investment style with a high equity exposure of 94.92%. To handle market instabilities, the mutual fund invests a small portion of 5.08% in cash and cash equivalents, which provide liquidity and flexibility. Let us clear it with a graph: 

This allocation shows the long term growth perspective of the fund.

Sector Allocation

The fund invests in more than 15 sectors, with no industry holding above 25%, to achieve diversification and balance risks. The primary sector allocations of the Nippon India Small Cap Fund include Industrials (21.07%), Materials (14.97%), Financials (14.92%), Consumer Discretionary (14.9%) and Consumer Staples (9.45%). Refer to the graph for a clearer picture:

This allocation combines growth sectors with stability, helping the fund to overcome market conditions.

Important: Best SIP Plan for 20 Years: With Equity, Debt & Hybrid Funds

In the next heading, let us explore whether investing in this fund is a good move for 2025 or not.

Is Nippon India Small Cap Fund a good investment in 2025?

Here are the benefits you get when investing in the Nippon India Small Cap Fund, making it a good investment option for 2025:

Long-Term Growth

The fund has the potential to generate impressive returns over time, with 32% (5-year) and 20% (10 year) returns that outperform peers and benchmarks.

Diversification

The fund provides investors with a broad exposure to over 200 small-cap stocks across various sectors, mitigating the risk associated with an individual stock.

Strong Track Record

The fund has consistently ranked among the top small-cap funds for long-term periods (5 and 10 years), which shows its stability and research-based stock selection.

Active Management

The fund is managed by an experienced team led by an expert manager with a proven track record of identifying companies with high growth potential.

SIP and Lump Sum Flexibility

The fund offers both lump sum and SIP investment methods. Depending on your flexibility, you can start SIP with Rs 1000 or invest in a lump sum from Rs 5000.

Liquidity and No Lock-In Period

It is an open-ended fund with no lock-in period. After completing the holding period of one year, you can redeem your units whenever required, or you will be charged 1% of the exit load.

Tax Efficiency

With investments in this mutual fund, you get the taxation benefits associated with equity. You can exempt long-term gains up to Rs 1.25 lakh and enjoy lower tax rates on amounts beyond that.

Now, let us analyse the risks involved in this mutual fund.

Nippon India Small Cap Fund Risk Analysis 

The Nippon India Small Cap Fund shows stronger returns after adjusting for risks, compared to its category peers.

Risk Measures

The risk management methods employed by the fund efficiently lower the associated risks. The fund has a standard deviation of 16.46, lower than the industry average, showing comparable volatility and a Sharpe Ratio of 0.93, which is more than the industry average, displaying superior risk-adjusted returns. An Alpha of 2.19 surpasses the benchmark. Additionally, a Beta of 0.83 indicates lower market sensitivity and its max drawdown of -23.42% aligns with peers but recovers faster in 5 months comparatively. Check the graph below:

Stocks Quality 

The fund's P/E ratio is 26.39, higher than the category average. This suggests it has a high valuation due to strong earnings growth. The fund's earnings are growing by 18.61%, sales are increasing by 9.99% and cash flow is up by 4.74%. All these figures are better than the category averages and show the fund's growth.

Let us analyse the suitability of this fund for several types of investment goals.

Who Should Invest in Nippon India Small Cap Fund

Described below are the types of investors who are highly suitable for investing in the Nippon India Small Cap Fund in 2025:

• Aggressive Investors
  

  Investors who can tolerate the fluctuations in the investment value due to the high risk associated with this mutual fund.

• Investors with a Long-Term Horizon
  

  This fund is highly suitable for investors who are willing to invest continuously for a long term (over 7 years) to ride out the market cycles.

• Wealth Builders
  

  Appropriate for investors looking for capital appreciation by investing in the emerging growth potential of small cap companies.

• Investors Seeking Diversification
  

  Investors who want to diversify their portfolio in small caps can consider investing in this small cap mutual fund.

• Experienced Investors
  

  It is suitable for seasoned investors who can better understand the equity market and small cap dynamics to navigate the risks involved. 

Concluding Nippon India Small Cap Fund Review

To conclude the Nippon India Small Cap Fund Review, it is a strong investment option for 2025, particularly for those who want higher growth.

Despite its high risk profile, its diversified portfolio offers impressive long-term performance. It is a valuable addition for investors focused on long-term wealth creation who can handle risks and volatility.

Related Blogs:

1. Nippon India Large Cap Fund Delivers 21% SIP Returns in 5 Yrs
2. Why Nippon India Growth Fund is a Smart Mid-Cap Bet in 2025?

FAQs

1. Which is better, Quant or Nippon?
   

   Both are strong; Nippon offers higher assets and returns, while the Quant has a slightly different risk profile.

2. How much does this mutual fund charge as an expense ratio?
   

   Nippon India Small Cap Fund charges around 0.64% as an expense ratio for direct plans.

3. What is the risk level of Nippon India Small Cap Fund?
   

   It carries a very high risk rating due to its primary allocation in small-cap stocks.

4. Is there any lock-in period in this mutual fund?
   

   No, Nippon India Small Cap Fund has no lock-in period; investors can redeem their units anytime.

5. How do I invest in the Nippon India Small Cap Fund?
   

   Invest easily online via investment platforms or directly through Nippon India Mutual Fund AMC.