Which Small Cap Fund is Best in 2024?
Introduction
The title of this blog very clearly sums up as far as the introduction goes. Let's uncover the best Small Cap Mutual Funds to invest in 2024. In this exciting analysis, we'll explore the top 5 funds that excel in the best investing style, consistent returns, strong management teams, quality portfolios, and smart risk management. We're not just looking at the past; we're also predicting how these funds will perform in the next 3-5 years. Join us as we reveal the future stars of investing and learn how to build a successful portfolio.
5 Tips for Investing in Small Cap Funds
Now before we begin our analysis, it is important to understand some important tips for small-cap investing which are as follows:
- Your minimum duration for this investment should be 5 years. Otherwise, it is advised to not invest in it
- There is always a risk of 30% fall, which is why it is necessary to keep this in mind.
- The AUM (asset under management) should be between Rs.500 to Rs.1500 Crores.
- For the next 3-5 years, diversified small-cap funds are best, with at least 50-70 stocks.
- Fund managers should be small cap specialists.
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List of Top 5 Small Cap Mutual Funds
| Scheme Name | 3 Yrs Returns | 5 Yrs Returns | AUM(Cr) | Fund Managers |
|---|---|---|---|---|
| Nippon India Small Cap Fund | 34.29% | 32.17% | 50422 | Sameer Rachh |
| SBI Small Cap Fund | 23.51% | 26.25 | 27759 | Rama Iyer Srinivasan |
| Quant Small Cap Fund | 33.48% | 40.74% | 20164 | Sandeep Tandon |
| Bandhan Small cap Fund | 29.35% | - | 4994 | Manish Gunwani |
| Mahindra Manulife Small Cap Fund | - | - | 3975 | Manish Lodha |
1. Nippon India Small Cap Fund
Having an AUM of Rs.50422.78 Crores, Nippon India Small Cap Fund has become the largest scheme in its category with approximately 26% average returns in 3 years and 21% returns in 5 years. Under the expert guidance of Mr. Sameer Rachh, a small-cap specialist with 30 years of experience, the fund focuses on finding growing companies with quality management early when their valuation is low. With a long-term approach to buying and holding stocks, this fund has achieved a consistency of 84%. It currently holds 202 stocks in its portfolio and is known for its strong portfolio management. Up to date, it has been successful with a consistency rate of up to 84%.
Click here to read our complete performance review of Nippon India Small Cap Fund
2. SBI Small Cap Fund
The SBI fund focuses on growing and scalable companies, currently holding 55 stocks and exhibiting minimal portfolio turnover at 9%. This approach underscores SBI's commitment to consistent performance, mirroring Nippon's strategy but with slightly better consistency. We can see a notable difference: it maintains a more concentrated portfolio with fewer specific companies. This strategy has resulted in high long-term returns, albeit with a higher risk of non-performance over extended periods. SBI small-cap manager is Mr Rama Iyer Srinivasan, he is also a highly experienced fund manager and has been managing the fund for 10 years.
Click here to read our complete performance review of SBI Small Cap Fund
3. Quant Small Cap Fund
Quant Small Cap Fund is known for generating high returns with an average of 44% annualised in 3 years and 29% annualized returns in 5 years it has given 100% consistency of returns of more than 20%. Mr Sandeep Tondan brings both consistency and capability to manage a diversified portfolio of 91 stocks, the portfolio turnover ratio has been recorded at 87%. Their investing style is what sets them apart from their peers, by buying small-cap stocks at the right time and selling them at the right time. They use predictive analysis which provides insights for right entry and exit. Quant grabs every opportunity in the market and identifies the stocks when they come out from neglected to desirable phase.
Click here to read our complete performance review of Quant Small Cap Fund
4. Bandhan Small Cap Fund
Bandhan Small Cap Fund is a recently launched scheme in its category. This fund has made an exciting entry giving 33% of annualized returns in 3 years while keeping its focus on quality management and targeting growing companies at reasonable valuations. Mr Manish Gunwani who has recently jumped ships from Nippon brings the expertise and experience exactly what it needs. It has diversified its 154 stocks across different sectors hoping to make absolute high returns almost 2-3 times in a short time frame. It can be said with confidence that this fund has the ability to become the next Multi-bagger scheme of its category.
Click here to read our complete performance review of Bandhan Small Cap Fund
5. Mahindra Manulife Small Cap Fund
After being launched 2 years back on Dec 12, Mahindra Manulife Small Cap Fund has opted for a realistic view when it comes to stock selection. This fund has gained a lot of limelight for making money through active investing. Their focus is on the under-researched growing companies where valuations are low. With a fund manager like Mr Manish Lodha, their active management is seen as strong and has maintained the churning, meaning updating their portfolio at a rate of 245%. It is still early to make an idea about their small-cap specialisation but seems to have the potential to generate high returns for its investors.
Click here to read our complete performance review of Mahindra Manulife Small Cap Fund
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Moreover, our conducted analysis has helped us to identify the two best funds on every parameter. If you want to invest for the next 3 to 5 years Quant Small Cap Fund is the best fit with active investing. Whereas Bandhan Small Cap Fund will be well suited for buy and hold investment approach.
To read more about this category you can refer to How to Select the Best Small Cap Funds
Conclusion
Let's review the recent performance of these Mutual Funds over the last period.
| Scheme Name | 3 Yrs Returns | 5 Yrs Returns |
|---|---|---|
| Nippon India Small Cap Fund | 34.29% | 32.17% |
| SBI Small Cap Fund | 23.51% | 26.25 |
| Quant Small Cap Fund | 33.48% | 40.74% |
| Bandhan Small cap Fund | 29.35% | - |
| Mahindra Manulife Small Cap Fund | - | - |
The Nifty small-cap index delivered returns of 29% in 6 months and nearly 68% in 1 year. Both Nippon and SBI failed to surpass the index returns. However, the quantity, Bandhan, and returns of Mahindra are quite impressive. They are tied for the best returns.
On that final note, we've listed the 5 best Small Cap Funds for 2024. Since small-cap investments can be risky, using the SIP (Systematic Investment Plan) method is a good idea. This means investing a set amount regularly over time, which helps reduce risk and can be a smart way to invest in these funds.
Best Funds
| Top funds | 1M Return | 6M Return | 1Y Return | 3Y Return | 5Y Return |
|
|
|---|---|---|---|---|---|---|---|
| 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 | |
| Mahindra Manulife Small Cap Fund - Regular Plan - Growth | -1.66% | 20.1% | 58.76% | 0% | 0% | 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 |