3 Small Cap Funds That Turned Rs 10,000 SIP Into Rs 35 Lakhs in 10 Years 

Hi everyone,

I am Divya Grover, here to help take informed mutual fund investment decisions.

Small cap funds have witnessed a spectacular run over the last few years. Even during the recent market correction, they remained resilient and outperformed their large cap counterparts.

Although the Indian equity market has come off its all-time highs due to uncertain market conditions in recent months, investors have continued to invest in small cap funds, attracted by their multibagger potential.

That said, small cap funds are best suited for investors with a high risk appetite and a long-term investment horizon of at least 5 to 7 years.

One way to invest in this category is through a Systematic Investment Plan, or SIP. Investing through SIPs can help reduce the risk associated with timing the market while maximizing wealth creation over the long run.

In this video, we'll look at three small cap funds that turned a monthly SIP of Rs 10,000 into more than Rs 3.5 million over a period of 10 years.

Let's begin.

#1: Quant Small Cap Fund

Originally launched in October 1996 as a debt-oriented fund, Quant Small Cap Fund underwent recategorisation in 2018.

The fund follows a quantitative approach to stock selection. It is known for its high portfolio churn strategy and its preference for momentum-driven investment opportunities.

It currently has an AUM of Rs 337 billion, making it the fourth largest fund in the category.

Now, if you had invested Rs 10,000 every month through an SIP for 10 years, taking your total investment to Rs 1.2 million, your investment would have grown to a staggering Rs 4.6 million.

That translates into an XIRR of 25.4%.

Its top stock holdings are HFCL, RBL Bank, Adani Power, Adani Enterprises, and Adani Green Energy.

#2: Nippon India Small Cap Fund

Launched in September 2010, the Nippon India Small Cap Fund focuses on identifying businesses with good growth potential, quality management, and rational valuations.

Instead of chasing momentum, the fund prefers holding stocks with a decent margin of safety across market caps and sectors.

It currently has an AUM of Rs 784 billion, making it the largest scheme in the category.

A monthly SIP of Rs 10,000 over 10 years, with a total investment of Rs 1.2 million, would have grown to nearly Rs 3.9 million.

This translates into an XIRR of 22.1%.

The fund maintains a diversified portfolio of over 200 stocks, helping reduce downside risk through diversification.

Its top stock holdings are HDFC Bank, Bharat Heavy Electricals, Apar Industries, TD Power Systems, and SBI.

#3: Axis Small Cap Fund

Launched in November 2013, the Axis Small Cap Fund follows a bottom-up approach and invests with a long-term perspective.

The fund prefers companies with high profitability, strong corporate governance, consistent earnings, and the ability to withstand market shocks.

It currently has an AUM of Rs 294 billion, making it the fifth largest fund in the category.

A monthly SIP of Rs 10,000 over 10 years, with a total investment of Rs 1.2 million, would have grown to Rs 3.5 million.

That works out to an XIRR of 20.5%.

Its top stock holdings are Krishna Institute of Medical Sciences, CCL Products (India), JB Chemicals & Pharma, City Union Bank, and Sai Life Sciences.

Conclusion

Small cap funds are inherently volatile and tend to witness sharp corrections during bearish market conditions.

They are particularly vulnerable to significant fluctuations in NAV during uncertain and challenging economic environments.

However, despite this volatility, small cap funds have strong long-term growth potential and can create substantial wealth for investors over time.

At the same time, investors should carefully consider their investment objectives and risk-taking ability before deciding how much to allocate to small cap funds.

Finally, maintaining a well-diversified portfolio of equity mutual funds across different categories can help reduce the impact of market fluctuations and support better risk-adjusted returns over the long term.

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, enlistment as RA and IA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.