Is SBI Small Cap Fund a Good Investment? Experts Review
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Did you know the SBI Small Cap Fund has been a consistent performer, with 23.06% returns in the last five years, beating the Nifty 50 TRI by great margins? Yes, you got that right.
But to find a good small cap fund, is consistency what you should seek or are there other factors? Well, of course, good diversification, experienced fund managers and a clear investment strategy go a long way to making a fund a good investment.
That is why this expert analysis will weigh this small cap fund of the SBI Mutual Fund house on every parameter, from its performance over the years, strategy, allocation of assets, stock quality and risk profile, so you won't leave any stone unturned to certify that SBI small cap fund is indeed a good investment for you in 2025. Let's begin.
Does SBI Small Cap Fund Investing Style Make it a Good Investment?
The investment philosophy used by the SBI small cap fund is based on a growth-oriented strategy while using a "Buy & Hold" approach to earn high returns for your portfolio. This investment approach has enabled this small cap fund to identify scalable businesses with strong growth potential so that it can easily purchase the stocks at reasonable prices.
Moreover, this small cap fund has spread its investments across 58-64 stocks to minimize the risk with only a 9% turnover rate.
Alas, this investment style has helped the SBI Small Cap Fund to become a good investment alternative amongst the various other Small Cap Mutual Funds. Its unique investing style is smartly crafted to make substantial returns in the long term by investing in fast-emerging small cap companies.
Hence, its investment approach makes it a good choice for new as well as experienced investor looking to grow their money fast.
Another great point to explore if SBI small cap fund is a good investment or not is by looking at its performance over different periods.
Let’s cover that in the next heading.
What is the Rolling Return of SBI Small Cap Fund vs Nifty 50 TRI?
The SBI small cap fund has outperformed nifty 50 TRI on a rolling return basis over the last years. You see, in the last 3 years, this small cap fund has given 25.93% returns, which shows how amazingly beating its benchmark of 19.46%.
Similarly, with a consistency of 94%, if you look further deeper, it delivered 23.06% returns in the 5-year period outperforming its benchmark again of 14.33%, showing its ability to withstand the volatile market and still give sound returns to its investors.
You can refer to the below graph to see the data on your own:
Pro Tip: Learn “How to calculate the rolling returns of mutual funds?”
What is the Return of SBI Small Cap Fund SIP?
The SBI Small Cap Fund has not performed as well as the market or other similar Mutual Funds over the past 3 and 5 years. It gave a return of 8.34% in the last 3 years and 16.15% over 5 years, which is lower than the returns of the Nifty Small Cap 250 index and the average return of other small cap funds.
The graph below shows the data on its performance based on SIP returns:
This underperformance by the SBI small cap fund is marked by the corrections in the small cap stocks as many of those were trading at stretched valuations that ultimately dropped their prices.
Has this made you worry? If yes, then you might be relieved to hear that the fund managers have planned a new allocation strategy that involves potentially selling off some stocks that have underperformed and will continue to buy the ones with more potential.
Moreover, these types of ups and downs are more common than you may realise when investing in small cap mutual funds. Why?
Well, the SBI small-cap fund's strategy involves focusing on smaller, high-growth companies and avoiding large caps that offer higher returns but investing in this fund makes it more susceptible to volatility and potential highs and lows from time to time.
Pro Tip: You can now do your own calculations using the SIP Calculator online.
On this note, let’s see hand in hand what major changes this small cap fund has made so far to improve its performance.
What is the Allocation of SBI Small Cap Fund?
The allocation of this fund has been smartly done, by keeping 46% in the small cap stocks focusing on small-sized and fast-growing companies yet keeping 54% in the mid caps to balance growth with moderate risk in the portfolio.
Take a look at the below pie chart to see the distribution more clearly:
At last, this small cap fund is investing in companies that are still expanding to provide an opportunity to make the next multi-bagger returns in the long term.
Pro Tip: Keep your investment one step ahead, use the Step Up SIP Calculator to learn how.
SBI Small Cap Fund Sector Allocation Review
The way in which the SBI small cap fund has divided its assets points towards a growth-focused strategy with higher investments in the industrial sector at 25.07% and 19.74% allocation in consumer discretionary as these sectors perform well when there is economic expansion or rise in consumer spending.
Let's review the pie chart before you delve into more statistics:
By looking at the above chart, the fund seems slightly overweight towards the financial sector with 19.63% expecting gains from economic growth and higher interest rates. Likewise, it has invested a small portion of 5.57% in consumer staples, which will give stability during market downturns.
Furthermore, after a close expert review, the fund is underweight in the materials sector (14.08%), hoping to avoid exposure to more volatile sectors. All in all this distribution seems to target growth while helping the fund maintain a balanced risk profile.
Analyzing the Selection & Stock Quality of SBI Small Cap Fund
The selection of stocks of the SBI small cap fund is done by considering the following factors:
- Company’s sales growth
- Profits made by the invested companies
- Cash inflows brought by companies
- The price-to-earnings (PE) ratio
Now, keeping the above points as parameters, let's analyse how well this small cap fund is performing on these measures:
| Fundamental Ratios | Values |
|---|---|
| Sales Growth | 11.02% |
| Earnings Growth | 17.09% |
| Cash Flow | 10.03% |
| PE- Valuations | 20.32 |
The higher PE ratio of the SBI small cap fund is 20.32% vs 9.06% of its category average means that the stocks are purchased at a premium price that reflects expectations of seeing strong future growth. Meanwhile, its earnings growth is lowered to 17.09% and also the sales are close to margins.
Looking at the above table the experts conclude that the fund portrays strong growth potential but the higher PE ratio (Price-to-earnings) a higher level of risk, so you need to be cautious before investing.
Don’t miss your chance and start your investment in the Best Mutual Funds out there.
SBI Small Cap Fund: Striking a Balance Between Risk & Reward
The SBI Small Cap Fund has had a tough time recently, losing 22.07%, but it is important to remember that small-cap stocks can be more unpredictable and can bounce back in the future.
Let’s take a look at the graph below before reading the risk analysis:
As shown in the above graph, the SBI small cap fund did not do as well as its benchmark index, which lost 18.62% but that also means there is potential for better returns when the market improves. The fund’s risk, shown by a standard deviation of 15.18%, is higher, which is normal for small-cap investments. While the Sharpe ratio of 0.59 shows that the returns have not been great compared to the risk, the fund still has the possibility to recover and give good returns in the long run if market conditions get better.
Smart Investments, Bigger Returns
But you know what? An expert's insight can go a long way. So let’s review the mastermind behind this small cap fund.
Time to Talk About SBI Small Cap Fund Manager
The fund we are discussing is in excellent hands with Mr. SR Srinivasan, who has over 30+ years of experience in the financial field. He is a well-known equity mutual funds manager who has managed the SBI India Small Cap Fund for ten years. Under his leadership, this scheme has consistently outperformed its peers and benchmark in the last 1 year.
“Small Caps today are better than a decade ago”, read more on 3 Best Small Cap Funds for 2025
Is SBI Small Cap Fund the Right Investment for You?
If you are someone looking for consistent growth by strategically investing in structural themes this small cap fund is your best fit.
The following points will help you understand better whether you should invest in this fund or not:
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Best for High-Risk Takers
If you are ready to take high risk for higher returns, this fund's focus on strategic bets and small cap stocks can potentially yield high returns for your portfolio.
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Having Long Term Investment Plan
Investing in the best small cap mutual funds requires a minimum duration of 5-7 years depending on your goal. As the nature of this small cap category is volatile, you need patience to ride out market fluctuations.
To Conclude SBI Small Cap Fund Review
To wrap up the SBI small cap fund review, it summarizes that if you are willing to bet on making higher returns, you need to level up your risk tolerance.
And if you are looking to invest in a small cap fund, then what better alternative than SBI small cap mutual fund? It has been a consistent performer and it checks out on all the parameters with a green light.
However, still stressed over high risk? You can start investing via SIP (Systematic Investment Plan) and hold onto your investments for 5+ years, which will help manage the risk. All in all, it's a great time of the year to start investing for a better future.
