Last Updated on Jul 30, 2024 by Anjali Chourasiya
Did you know that the Securities and Exchange Board of India (SEBI) has defined 12 types of equity funds? One among them is the small-cap mutual fund. They are known to yield higher returns but are also considered risky investments. Let’s dive into them, their features, and the best small-cap mutual funds in 2023.
Table of Contents
What is a small-cap mutual fund?
A small-cap mutual fund is an equity mutual fund that invests a minimum of 65% in the stocks of companies with a market capitalisation of less than Rs. 5,000 cr. The stocks that are ranked 251 and below are called small-cap stocks. Small-cap mutual funds are highly volatile but also tend to offer higher returns.
Since they are risky, these funds are suitable for aggressive investors. They can be considered for a long-term investment horizon. However, investments in small-cap equity mutual funds do not provide any tax benefit.
Read “What Is Small Cap Fund – Meaning, Features, Benefits and How To Invest” to learn more about it.
Best Small Cap Mutual Funds in 2024
Based on AUM
| Mutual fund name | AUM (Rs. in cr.) | Absolute Returns – 1Y (%) | Minimum SIP (Rs.) | Exit Load (%) | Expense Ratio (%) |
| Nippon India Small Cap Fund | 36,539.55 | 34.37 | 100.00 | 1.00 | 0.72 |
| HDFC Small Cap Fund | 21,066.56 | 38.68 | 5,000.00 | 1.00 | 0.75 |
| SBI Small Cap Fund | 20,911.70 | 19.08 | 0.00 | 1.00 | 0.69 |
| Axis Small Cap Fund | 15,025.00 | 22.75 | 0.00 | 1.00 | 0.55 |
| DSP Small Cap Fund | 12,083.25 | 26.28 | 0.00 | 1.00 | 0.90 |
| Kotak Small Cap Fund | 11,597.03 | 19.88 | 100.00 | 1.00 | 0.43 |
| HSBC Small Cap Fund | 11,549.40 | 31.02 | 1,000.00 | 1.00 | 0.71 |
| Franklin India Smaller Cos Fund | 9,595.27 | 33.95 | 0.00 | 1.00 | 0.96 |
| Quant Small Cap Fund | 8,075.14 | 35.39 | 1,000.00 | 1.00 | 0.77 |
| Canara Rob Small Cap Fund | 7,577.29 | 19.36 | 1,000.00 | 1.00 | 0.42 |
Note: The information is dated 26th September 2023. The parameters used to filter the list of small-cap mutual funds on Tickertape Mutual Fund Screener are:
- Category – Small-Cap Funds (Equity)
- Plan – Growth
- AUM – Sort from highest to lowest
Based on 3-yr CAGR
| Mutual fund name | AUM (Rs. in cr.) | CAGR 3Y (%) | CAGR 5Y (%) |
| Quant Small Cap Fund | 8,075.14 | 48.41 | 30.48 |
| Nippon India Small Cap Fund | 36,539.55 | 44.75 | 25.44 |
| HSBC Small Cap Fund | 11,549.40 | 43.29 | 20.88 |
| HDFC Small Cap Fund | 21,066.56 | 42.12 | 20.79 |
| Tata Small Cap Fund | 5,683.23 | 41.23 | 0.00 |
| ICICI Pru Smallcap Fund | 6,510.80 | 40.00 | 24.67 |
| Franklin India Smaller Cos Fund | 9,595.27 | 39.77 | 19.50 |
| Canara Rob Small Cap Fund | 7,577.29 | 39.58 | 0.00 |
| Edelweiss Small Cap Fund | 2,145.98 | 39.34 | 0.00 |
| Kotak Small Cap Fund | 11,597.03 | 38.33 | 24.73 |
Note: The information is dated 26th September 2023. The parameters used to filter the list of small-cap mutual funds on Tickertape Mutual Fund Screener are:
- Category – Small-Cap Funds (Equity)
- Plan – Growth
- CAGR – 3Y – set to High
Based on Volatility
| Mutual fund name | AUM (Rs. in cr.) | Volatility (%) | CAGR 3Y (%) |
| Sundaram Emerging Small Cap-Sr-VII | 159.75 | 8.33 | 33.75 |
| Kotak Small Cap Fund | 11,597.03 | 9.11 | 38.33 |
| Axis Small Cap Fund | 15,025.00 | 9.28 | 35.37 |
| SBI Small Cap Fund | 20,911.70 | 9.45 | 34.25 |
| Sundaram Small Cap Fund | 2,581.76 | 9.93 | 37.55 |
| ICICI Pru Smallcap Fund | 6,510.80 | 9.97 | 40.00 |
| UTI Small Cap Fund | 2,972.06 | 10.06 | 0.00 |
| Canara Rob Small Cap Fund | 7,577.29 | 10.30 | 39.58 |
| Invesco India Smallcap Fund | 2,436.35 | 10.38 | 35.54 |
| Union Small Cap Fund | 974.09 | 10.39 | 35.61 |
Note: The information is dated 26th September 2023. The parameters used to filter the list of small-cap mutual funds on Tickertape Mutual Fund Screener are:
- Category – Small-Cap Funds (Equity)
- Plan – Growth
- Volatility – Sort from lowest to highest
Based on 1-yr Absolute returns
| Mutual fund name | AUM (Rs. in cr.) | Absolute Returns – 1Y (%) | Minimum SIP (Rs.) |
| HDFC Small Cap Fund | 21,066.56 | 38.68 | 5000 |
| Quant Small Cap Fund | 8,075.14 | 35.39 | 1000 |
| Nippon India Small Cap Fund | 36,539.55 | 34.37 | 100 |
| Franklin India Smaller Cos Fund | 9,595.27 | 33.95 | 0 |
| HSBC Small Cap Fund | 11,549.40 | 31.02 | 1000 |
| ITI Small Cap Fund | 1,450.13 | 29.91 | 500 |
| Bandhan Emerging Businesses Fund | 2,014.27 | 28.57 | 100 |
| Tata Small Cap Fund | 5,683.23 | 28.51 | 1500 |
| Sundaram Small Cap Fund | 2,581.76 | 27.94 | 0 |
| DSP Small Cap Fund | 12,083.25 | 26.28 | 0 |
Note: The information is dated 26th September 2023. The parameters used to filter the list of small-cap mutual funds on Tickertape Mutual Fund Screener are:
- Category – Small-Cap Funds (Equity)
- Plan – Growth
- 1-yr Absolute Returns – Sort from highest to lowest
Taxation on Small-Cap Mutual Funds as per the 2024 Budget
Understanding the latest tax regulations on equity mutual funds is essential for making informed investment decisions. The Union Budget 2024 has introduced significant changes to the taxation of equity mutual funds, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules:
Short-Term Capital Gains (STCG)
If you hold equity mutual funds for less than a year, the gains from these investments are classified as short-term capital gains. According to the new budget, these gains are now taxed at a rate of 20%, which has been increased from the previous rate of 15%.
Long-Term Capital Gains (LTCG)
For equity mutual funds held for more than a year, the gains are considered long-term capital gains. The key points to note under the new budget are:
- Tax-Free Limit: Gains up to Rs. 1.25 lakh in a financial year remain tax-free. This limit has been increased from the previous threshold of Rs. 1 lakh.
- Tax Rate: Any gains above Rs. 1.25 lakh are taxed at a flat rate of 12.5%. It was previously taxed at 10%.
- Indexation: It’s important to note that the benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation is a method used to adjust the purchase price of an asset (like property or gold) for inflation over the years. This adjusted price is then used to calculate capital gains. Previously, long-term capital gains from selling property, gold, or other unlisted assets were taxed at 20%, but you could use indexation to reduce your taxable profit. The new rule simplifies the tax structure by setting a flat 12.5% tax rate for all long-term capital gains. However, it removes the indexation benefit.
Summary
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.
In a nutshell
Small-cap mutual funds are funds that invest in companies with smaller market capitalisation. They are risky and have a high potential for growth in future. Consult your financial advisor before investing in mutual funds to choose the right scheme for your portfolio. You can use Tickertape Mutual Fund Screener to filter small-cap mutual funds based on your preference. Don’t worry. For your research and investment needs, Tickertape hai na!
FAQs
1. Are small-cap mutual funds a good investment?
There are a few small-cap funds that provide great returns and has growth potential. However, they are also considered highly risky investments. Hence, consult your financial advisor before investing.
2. What are the benefits of small-cap mutual funds?
There are some benefits involved when you invest in small-cap funds, such as the potential for higher returns, risk diversification, lower rates, and excellent performance during a bull market.
3. Are small-cap funds risky?
Small-cap funds invest in companies that have a market capitalisation of less than Rs. 5,000 cr. They tend to offer better returns. However, they are riskier investments than mid- and large-cap funds.
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
