3 out of every 4 small cap mutual funds beat their benchmark in 5 years of Modi government

Three out of every four small cap mutual funds have managed to beat their respective benchmarks in the last five years of the Modi government. Out of 19 small cap funds that have completed five years in the market, 14 funds have outperformed their respective benchmarks in the same time period. This indicates that around 74% small cap funds outperformed their benchmarks in the last five years of the Modi government. Nippon India Small Cap Fund, the largest small cap fund based on assets under management, outperformed its benchmark in the last five years of Modi 2.0. The fund gave an absolute return of 304.07% against 217.18% by its benchmark (Nifty Smallcap 250 – TRI).

The oldest small cap fund, Quant Small Cap Fund (Earlier known as Quant Income Fund), offered an absolute return of 463.36% in the last five years against 217.18% by its benchmark (Nifty Smallcap 250 – TRI). This small cap fund topped the return chart in a five-year period.

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Kotak Small Cap Fund delivered an absolute return of 247.67% in the last five years of the Modi government. The scheme is benchmarked against Nifty Smallcap 250 – TRI which gave 217.18% in the same period.

Tata Small Cap Fund offered a 248.14% absolute return in Modi’s second term as PM. The scheme is benchmarked against Nifty Smallcap 250 – TRI which delivered 217.18% in the said period. SBI Small Cap Fund and DSP Small Cap Fund offered 223.23% and 211.51% in the Modi-led government’s second term. The schemes are benchmarked against S&P BSE 250 Small Cap – TRI which gave 206.39% in the same time period. Underperformers in small cap category

The small cap scheme with the second lowest assets under management, LIC MF Small Cap Fund, delivered a 210.25% absolute return in the last five years. The scheme is benchmarked against Nifty Smallcap 250 – TRI which gave 217.18% absolute return in the same time period.

Aditya Birla SL Small Cap Fund and HDFC Small Cap Fund delivered an absolute return of 135.63% and 196.93%, respectively in the last five years. The schemes are benchmarked against S&P BSE 250 Small Cap – TRI which offered 206.39% absolute return in the last five years.

Franklin India Smaller Cos Fund and Sundaram Small Cap Fund gave an absolute return of 211.92% and 188.61%, respectively. The schemes are benchmarked against Nifty Smallcap 250 – TRI which gave 217.18% returns in Modi’s second term as PM.

The small cap funds gave an average return of 243.94% in the last five years of the Modi government. These schemes are benchmarked against Nifty Smallcap 250 – TRI and S&P BSE 250 Small Cap – TRI.

We considered all small cap schemes that have completed five years in the market. We considered regular and growth options. We calculated absolute returns between May 23, 2019 and May 27, 2024.

Note, the above exercise is not a recommendation. This exercise was just to analyse how small cap funds performed against their benchmarks in the last five years of the Modi government.

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You need to include other factors while choosing a scheme to invest in. One should always consider their risk appetite, investment horizon, and goals before choosing mutual funds. One should not make investment or redemption decisions based on the above returns. Past performance does not guarantee future performance.

Small cap schemes are always considered risky. However, they also have the potential to deliver very high returns over a long period of time. The trouble is these schemes are also notorious for their very long bear phases. When the market gets into a lean phase small cap segments lose heavily as investors look for safer investment options.

This is why ETMutualFunds do not recommend small cap schemes to new and inexperienced investors. We always tell investors to gain experience and knowledge before investing in small cap schemes. We believe that only investors with a very high risk appetite and stomach for volatility should invest in small cap schemes. They also should have a long investment horizon of, say, seven to 10 years.

If you are looking for small cap recommendations, see:

Best small cap schemes to invest in May 2024