Why Is it the Right Time to Invest in Small and Mid Cap Funds?
It is an alert for investors with good risk appetite. The NAVs of most of the mutual funds are low and the market is predicting a strong time of revival, thus making it a good time to invest in mid and small-cap mutual funds. The small-cap as well as mid-cap space after a painful fall in 2018, are ready to take a flight in 2019.
That is why not only market pundits, but mutual fund experts and even fund managers are holding strong hopes from the two categories. Let’s find out the clear picture and know the best funds from the two categories to invest in now.
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What Experts Say About Investing in Small and Mid Cap Funds?
Experts are expecting small and mid-cap funds to start performing again just in the next few quarters. Although the returns will not be sky high for some time now like 50% or more which was seen before, this can be a good time to make an entry and stay invested for a long term.
Several investors have started ignoring small and mid-cap schemes after seeing the flood of negative returns in the past one year. After seeing the categories average returns of -13.68% and -22.69% in mid and small cap, resp., many investors who had started investing in any one of the categories just a few years back have either stopped their SIPs or done away with the investments.
There is no point of stopping your SIP investment when the market is negative as this way you miss your chance of accumulating a good number of units at lower NAVs and ultimately make a bigger loss. The idle money or the one which you are not investing is not growing its value. Investing from now to when the market starts going up will average their cost and help you create corpus in the long run.
- 100% Paperless
- No Transaction Charges
- Easy to Invest
- Safe & Secure
This is why investing now in a disciplined manner in the best small and midcap funds can prove to be beneficial for you as per experts.
Top Small and Mid Cap Fund for 2019
L&T Midcap Fund
Being one of the best funds of the mid cap category, L&T Mid Cap Fund Growth has earned the 5-star rating and an asset worth Rs 3665 crore as on Jan 31, 2019, due to strong trust and support of its investors. It has been an exceptional performer since its launch and has beaten both its category and benchmark returns in past 3, 5, 7, 10 years period with a good margin as on Feb 18, 2019.
| Basic Information: L&T Mid Cap Fund (G) | |
|---|---|
| Category | Equity: Mid Cap |
| Benchmark | NIFTY Midcap 100 TRI |
| Launch Date | 9-Aug-04 |
| Asset Size | Rs. 3,665 crore (As on Jan 31, 2019) |
| Expense Ratio | 2.14% (As on Jan 31, 2019) |
| Minimum Investment | Rs. 5000 |
| Minimum SIP | Rs. 500 |
| Return Since Inception | 18.77% (As on Feb 15, 2019) |
| Exit Load | 1% on redemption before 365 days |
Coming to its portfolio allocation, the fund managers Mr. Soumendra Nath Lahiri and Mr. Vihang Naik are following a highly diversified investment approach with this scheme by investing in 79 stocks with 91.22% in equities and the rest in cash and cash equivalents. It has recently increased its allocation in financial, engineering, healthcare, and services sectors which are all growing segments in India.
Also Watch:
SBI Small Cap Fund
The scheme from SBI MF has widened its margin of outperformance in comparison to its benchmark and category in the past few years, thus earned itself a five-star rating. It is one of the best and most recommended schemes from the small-cap category as of now. The fund manager of SBI Small Cap Fund Growth Mr. R. Srinivasan is quite selective when it comes selecting stocks to invest in where he looks for five major attributes, namely competitive advantage, return on investment, growth, valuation, and good management. It is currently investing in 45 stocks following a diversified approach of investment.
| Basic Information- SBI Small Cap Fund (G) | |
|---|---|
| Category | Equity: Small Cap |
| Benchmark | S&P BSE Small Cap TRI |
| Launch Date | 9-Sep-09 |
| Asset Size | Rs.1,504 crore (As on Jan 31, 2019) |
| Expense Ratio | 2.44% (As on Dec 31, 2018) |
| Minimum SIP Investment | Rs. 500 |
| Minimum Lumpsum Investment | Rs. 5000 |
| Return Since Inception | 17.70% (As on Feb 15, 2019) |
| Exit Load | 1% for redemption within 365 days |
With a good investment of 64.02% in small caps, 24.19% in mid caps, and the remaining in giant and large-cap companies, it is placing good bets in FMCG, Engineering, Financial, Services, and Cons Durables.
Must Watch:
HDFC Small Cap Fund
It is another expert recommended and a five-star rating holder scheme from the small cap category which has been the favorite of several investors with a high risk appetite. It is currently maintaining an asset base of Rs 6164 crore as on Jan 31, 2019 showing strong trust of its investors.
| Basic Information- HDFC Small Cap Fund (G) | |
|---|---|
| Category | Equity: Small Cap |
| Benchmark | NIFTY Smallcap 100 TRI |
| Launch Date | 3-Apr-08 |
| Asset Size | Rs. 6164 crore(As on Jan 31, 2019) |
| Expense Ratio | 2.18 %(As on Jan 31, 2019) |
| Minimum SIP Investment | Rs. 500 |
| Minimum Lumpsum Investment | Rs. 5000 |
| Return Since Inception | 13.53% (As on Feb 15, 2019) |
| Exit Load | 1% for redemption within 365 days |
The fund managers Mr. Chirag Setalvad and Mr. Amar Kalkundrikar who has recently joined the team in 2019 believe in following a diversified investment approach with 71 stocks in the portfolio. The top five sectors that HDFC Small Cap Fund is investing include services, chemicals, engineering, financial, and automobile.
Also Watch:
Invesco India Mid Cap Fund
Invesco India Mid Cap Fund is one such product of Invesco Mutual Fund which can disperse good return even during the adverse market conditions. The fund is a four-star rated scheme which has managed to cap losses excellently in the past one year when the category delivered -13.55% returns and it has given -6.61% in the same period as on Feb 18, 2019.
| Basic Information: Invesco India Mid Cap Fund (G) | |
|---|---|
| Category | Equity: Mid Cap |
| Benchmark | NIFTY Midcap 100 TRI |
| Launch Date | 19-Apr-07 |
| Asset Size | Rs. 276 crore (As on Jan 31, 2019) |
| Expense Ratio | 2.51% (As on Jan 31, 2019) |
| Minimum Investment | Rs. 5000 |
| Minimum SIP | Rs. 500 |
| Return Since Inception | 13.52% (As on Feb 15, 2019) |
| Exit Load | 1% on redemption before 365 days |
It follows a diversified style of investment and currently has 43 stocks in its investment basket where the major allocation is given to finance, healthcare, engineering, energy, and services sector, which are all growth seeking segments. It has an AUM of Rs 276 crore as on Jan 31, 2019, which is less as compared to other schemes of the category, but this helps it to invest in quality stocks which offer strong valuations.
- 100% Paperless
- No Transaction Charges
- Easy to Invest
- Safe & Secure
DSP Midcap Fund
With an aim to generate long-term capital appreciation from a portfolio that has substantially invested in equities and related instruments of mid-cap companies, DSP Mid Cap Fund Growth has been one amongst the best mid-cap funds to invest in India. It is a great pick for investors with a good risk appetite which has maintained an AUM base of Rs 5,503 crore as on Jan 31, 2019.
| Basic Information: DSP Mid Cap Fund (G) | |
|---|---|
| Category | Equity: Mid Cap |
| Benchmark | NIFTY Midcap 100 TRI |
| Launch Date | 14-Nov-06 |
| Asset Size | Rs. 5,503 crore (As on Jan 31, 2019) |
| Expense Ratio | 2.10% (As on Jan 31, 2019) |
| Minimum Investment | Rs. 500 |
| Minimum SIP | Rs. 500 |
| Return Since Inception | 13.92% (As on Feb 15, 2019) |
| Exit Load | 1% on redemption before 364 days |
The fund managers Mr. Vinit Sambre and Ms. Resham Jain are following a diversified investment approach with 49 stocks in its fund’s basket. The top sectors where the fund managers bet are financial, chemicals, healthcare, engineering, and cons durable, all of which hold strong growth prospects as of now. In all cycles of 1, 3, 5, 7, and 10 years, it has outperformed its category’s average with a good margin as of Feb 18, 2019, showing strong signs of fund management.
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Comparison of Past Returns and AUM
| Name | AUM (As on Jan 31, 2019) | Returns (As on Feb 15, 2019) | |||
|---|---|---|---|---|---|
| 3 Years | 5 Years | 7 Years | 10 Years | ||
| Invesco India Mid Cap Fund (G) | Rs. 276 crore | 13.61% | 20.33% | 17.34% | 23.57% |
| SBI Small Cap Fund (G) | Rs.1,504 crore | 15.72% | 28.09% | 22.43% | NA |
| L&T Mid Cap Fund (G) | Rs. 3,665 crore | 15.36% | 23.02% | 18.30% | 22.83% |
| HDFC Small Cap Fund (G) | Rs. 6164 crore | 19.05% | 19.51% | 16.27% | 20.47% |
| DSP Mid Cap Fund (G) | Rs. 5,503 crore | 14.73% | 20.69% | 16.50% | 22.60% |
Conclusion
Small and mid-cap funds are high returns giving schemes if the opportunities are favorable and the market keeps on growing. As clear from the above information, such funds are suitable and advised to investors who can stomach higher risk for high returns and have a long term investment horizon. Investors who are new for mutual fund investment, small-cap funds are never advised. They can choose to start with a hybrid fund according to their risk appetite. A multi-cap scheme can also be a good pick for naive investors if the scheme invests in pure equities. Further, SIP investment should be done where an investor can start investing with a small amount and gain the benefit of rupee cost averaging and compounding.
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