Jun 01, 2024 6 min read

SBI Small Cap Fund : Is It a Safe Investment Choice in 2024?

If you are looking to make high returns, the SBI Small Cap Fund is a top choice for investors interested in small-cap stocks. Launched on September 5th 2009, it has quickly become one of the best performers in its category. With an impressive Asset Under Management (AUM) of 27,759 crores as of 30th April 2024, this fund offers protection with a good downside ratio.

Does this mean, you should invest in this scheme? Will it be a safe choice for your portfolio? How does this scheme balance risk and returns?

If these are some questions that come to your mind stay with us as we analyse this scheme on every parameter. Stay tuned till the end to discover which are the best small cap funds for SIP.

Let’s start with understanding what is the investment approach of this scheme that sets it apart from its peers.

What is unique about SBI's Small Cap Investment strategy?

The SBI Small Cap Fund focuses on buying and holding small company stocks for a long time to earn good returns. Utilizing a "Bottom Up" approach, the fund identifies scalable businesses with strong growth prospects and reasonable valuations.

It has spread its investments across 56 stocks equally to reduce risk and trades very little, with only a 9% turnover rate. This careful strategy aims to make substantial returns over time by investing in high-growth small companies. This makes the SBI Small Cap Fund a good choice for investors looking to grow their money in the Small Cap Mutual Funds.

Let's Check the Fund Manager's Impact on Your Wealth

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.

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What are the rolling returns of the SBI Small Cap Fund compared to its benchmark?

In this graph, we show the 3- and 5-year rolling returns (rolled daily) of SBI Small Cap Mutual Fund (yellow line) since the scheme's inception and compare them to the benchmark, Nifty Small Cap 250 TRI (blue line).

 Rolling Returns of SBI Small Cap Fund


Since 2009, if you had invested your money for 3 years at any point, you would have received an average annual return of almost 26.95%. In terms of consistency, 87% of the time it has delivered returns of more than 15%. We compared the same investment with its benchmark, the NIFTY 50 TRI, to evaluate the fund's performance. The index has provided only a 16.04% return with a 65% probability of consistency. This is why this fund is considered an alpha generator.

Furthermore, the fund's 5-year rolling return is 21.61%, outperforming its benchmark of 13.02%. This demonstrates the consistent outperformance of the SBI Small Cap fund compared to its benchmarks.

How has the SBI Small Cap Fund performed recently?

Let's talk about the recent performance of the SBI small cap Fund. Over the past 6 months, it has delivered a return of 20.85%. However, when compared to its benchmark of 29.16%, this fund underperformed. However, it has the potential to generate high returns in the long term.

Looking at the 1-year returns, it has yielded 40.25%. In comparison, its benchmark returned 67.95%. This fund closely tracks its benchmark but falls short in terms of performance.

 Recent Performance of SBI Small Cap Fund

SBI Small Capital Fund: Striking a Balance Between Risk and Reward

Over the past 6 months, the SBI Small Cap Fund declined by -7.87%, which is significantly better than the average decline of 13.07% for similar funds in the same category. This indicates that the SBI Small Cap Fund has outperformed its benchmark during this period, suggesting the fund has delivered stronger and more stable returns that were less impacted by market changes.

 SBI Small Cap Fund Risk Analysis

The SBI Small Cap Fund's risk analysis reveals a standard deviation of 12.07, indicating high volatility. With a Sharpe Ratio of 1.55, the fund delivers good returns for the risk taken. Its upside capture ratio is 70, which shows its performance is close compared to its benchmark's 83. Additionally, the downside capture ratio of 41 indicates it loses less than the benchmark in falling markets. Overall, while the fund is volatile, it offers strong risk-adjusted returns.

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Exploring the Contents of the SBI Small Cap Fund's Portfolio

The SBI Mutual Funds have a well-diversified market cap exposure, with its largest portion 44.19% allocated to small-cap stocks The fund also has a high allocation to mid-cap stocks 55.81%. This balanced strategy combines the stability of small-cap assets with the potential for growth from mid-cap investments.

The SBI Small Cap fund has its largest exposure in the Industrial sector, which makes up 32.08% of the portfolio. This is followed by the Energy & Utilities sector at 20.59% and the Financial sector at 13.6%.

The fund also has notable allocations to the material sector (13.39) and the consumer staples sector 4.73.

 Sector Allocation of SBI Small Cap Fund

How does the SBI Small Cap Fund choose and analyse quality stocks?

When analysing the stocks in this fund, the key things we look at are:

  1. How fast the companies' sales are growing
  2. How much profit the companies are making
  3. How much cash the companies are bringing in
  4. The price-to-earnings (PE) ratio of the companies

The companies in this scheme are performing very well on all these measures:

  • On average, the companies' sales are growing rapidly at 9.96% per year
  • The companies are making a healthy 24% profit margin
  • The company's cash flow is increasing by a strong 44.37%
  • The companies have a relatively low PE ratio of 26, so we're getting them at a good price.

Overall, this shows that the fund is full of high-quality, rapidly rising firms. That's why we think this SBI Small Cap Fund is one of the best options for investors seeking growth in small-cap stocks.

The combination of rapid sales growth, good profitability, strong cash flow, and reasonable valuations makes these underlying companies look very promising.

Is the SBI Small Cap Fund right investment for you?

Seeking long-term capital appreciation? This fund aims for consistent growth by strategically investing in structural themes while maintaining a diversified portfolio to manage risk effectively.

Investors with high tolerance

If you are ready to take high risk for high returns, this fund's focus on strategic bets and small-cap stocks can potentially yield higher returns.

Invest for at least 5+ years

It is advisable to fully utilize the growth potential with SIP in small-cap stocks, requiring patience to ride out market fluctuations.

The wait is over, Explore the Best Small Cap Funds for SIP. 

Best Funds

Top funds 1M Return 6M Return 1Y Return 3Y Return 5Y Return
  • 1M Return
  • 6M Return
  • 1Y Return
  • 3Y Return
  • 5Y Return
Axis Small Cap Fund - Regular Plan - Growth -2.98% 9.52% 35.69% 24.88% 25.24% Invest
SBI Small Cap Fund - Regular Plan - Growth 0.44% 9.06% 32.45% 21.9% 23.27% Invest
Nippon India Small Cap Fund - Growth Plan - Growth Option -1.07% 13.49% 49.3% 31.98% 27.99% Invest
Bandhan Small Cap Fund - Regular Plan - Growth -1.94% 24.4% 62.7% 26.73% 0% Invest
Quant Small Cap Fund-Growth 0.79% 27.03% 60.88% 40.91% 35.05% Invest
ITI Small Cap Fund Regular - Growth -0.91% 22.8% 54.87% 20.15% 0% Invest
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