Top 5 Best Small Cap Funds to invest in 2017

Top and Best Small Cap Funds to invest in 2017 in IndiaTop 5 Best Small Cap Funds to invest in 2017


Largecap mutual funds provide stable returns to investors in the long term. However, one should also invest in midcap and small cap mutual funds that can provide amazing returns in short term to long term. Small Cap Funds invests in multibagger stocks that has potential to get very high returns in short to medium term. However these carry high risk as they invest in Small Cap stocks. Which are the Top 5 Small Cap Mutual funds to invest in 2017?  Who can invest in these Small Cap Mutual Funds? I would provide some insights about some of the Best Small Cap mutual funds that has outperformed in the recent bull run.

Also Read: Best Mid Cap Mutual Funds to invest in India in 2017

Top 5 Best Small Cap Funds to invest in 2017


These Top and Best Small Cap Mutual Funds in India have been analyzed and shortlisted based on some of the key parameters.

  • Funds are picked based on highest returns received in the last 3 to 5 years.
  • These funds are ranked based on 1, 3 and 5 years returns which indicates that such funds perform well in medium to long run.
  • Picked up the funds, which are rated by Crisil as Rank-1, Rank-2 and Rank-3 which indicates good fundamentals in the small cap mutual funds segment.
  • Value research (VRO) rated these mutual funds as 5 star, 4 star and 3 star.
  • AUMs (Assets under management) > 700 Crores. This proves investor confidence among these top mutual funds.
  • Some of the fund names are indicated as “mid-cap”, however in reality they invest in small cap funds, hence value research online categorises them under Small Cap Mutual Funds.

Who should invest in these Small Cap Funds?


Small Cap funds invests in small companies that has potential to grow. These funds invests majorly in Small Cap stocks and to some extent in midcap stocks. Since these invests in Small Cap stocks, returns from such funds would be highly volatile. Some of the stocks can erode some of your capital. However, on otherside, such stocks can double or triple in just few years. Hence instead of investing in Small Cap stocks, it is better to invest in Small Cap funds which would invests in diversified portfolio of Small Cap stocks and such volatility would be minimized.

In net summary, investing 15% to 20% in such Small Cap funds can make your portfolio “high risk high return” in medium to long term. Investors who are high risk to moderate risk takers can invest in such Small Cap funds for 5-10 years period. They can invest in SIP or lumpsum (when markets are taking correction).

Top 5 Small Cap Mutual Funds to invest in 2017 in India


Top#1 – Reliance Small Cap Fund


Top 5 Small Cap Funds to invest - Reliance Small Cap fund

This scheme aims to generate capital appreciation by investing in smaller companies. This is just 5 years old scheme. However, in these 5 years, it has beaten its peers with high returns.

Fund Performance: This fund has beaten its benchmark and provided 33% annualised returns in last 5 years. This fund gave 43% returns in the last 1 year which is the highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 140,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 2.1 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 4.1 Lakhs.

Why to invest: This fund has beaten its peers and given highest returns in last 1 year and last 5 years. This fund is rated by Crisil as Rank-2 and Value Research Online as 3 Star. This fund risk grade is “Above Avg” and Return Grade is “Above Avg” as per Value Research Online. One of the best Small Cap mutual fund to invest in 2017 for short term, medium term and long term of 5-10 years.

Top#2 – DSP BR Micro Cap Fund


Best Small Cap Funds to invest in India - DSP BR Microcap fund

The aim of the fund is to seek long-term capital appreciation by investing in a portfolio of stocks that are not part of the top 300 companies by market capitalisation.

This is a rare small-cap fund to have beaten its benchmark in every one of the last eight years from 2008. It has also stayed ahead of the peers fund schemes in every year except in 2012.

Fund Performance: This fund has beaten its benchmark and provided 33% annualised returns in last 5 years. This fund gave 36% returns in the last 1 year which is the second highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 142,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 2.4 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 4.1 Lakhs. Means, this fund has provided good returns even for lumpsum investments.

Why to invest: This fund has beaten its peers and given highest returns in last 1 year and last 5 years. This fund is rated by Crisil as Rank-1 and Value Research Online as 4 Star. This fund risk grade is “Average” and Return Grade is “Above Avg” as per Value Research Online. One of the good Small Cap mutual fund to invest in 2017 for medium term to long term of 5-10 years. Currently this fund is not accepting fresh investments, if you have already invested, stay invested in this fund. If your SIPS are going on, continue to invest in such funds.

Top#3 – Franklin India Smaller Cos fund


Top 5 Small Cap Funds to invest in 2017- Franklin India Smaller cos fund

The scheme aims to provide long-term capital appreciation by investing in mid and small cap companies. Normally, it would invest at least 75 per cent of its assets in smaller companies.

Fund Performance: This fund has beaten its benchmark and provided 33% annualised returns in last 5 years. This fund gave 28% returns in the last 1 year which is the second highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 130,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 2.0 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 4.2 Lakhs. While this fund gave good returns for lumpsum investments for 5 years, it could not beat its peers in 3 years category. However, it still gave higher returns in small cap segment.

Why to invest: This fund has beaten its peers and given good returns in last 1 year and last 5 years. This fund is rated by Crisil as Rank-2 and Value Research Online as 4 Star. This fund risk grade is “Moderately High” and Return Grade is “Low” as per Value Research Online. One of the good Small Cap mutual fund to invest in 2017 for long term 8-10 years.

Also Read: Top Large Cap Funds to invest in 2017

Top#4 – SBI Small and Midcap Fund


Good Small Cap Funds to invest in India - SBI midcap and smallcap fund

The mutual fund scheme aims long-term capital appreciation by investing in a diversified portfolio of small & midcap stocks.

Fund Performance: This fund has beaten its benchmark and provided 32% annualised returns in last 5 years. This fund gave 31% returns in the last 1 year which is the 4th highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 133,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 2.3 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 4 Lakhs.

Why to invest: This fund has beaten its peers and given superior returns in last 1 year and last 5 years. This fund is not rated by Crisil and Value Research Online rated as 3 Star. This fund risk grade is “Average” and Return Grade is “Above Average” as per Value Research Online. One of the best mutual fund in Small Cap segment to invest in 2017 for long term 8-10 years.

Top#5 – L&T Mid-cap Fund


Top Small Cap Funds to invest in 2017- L&T midcap fund

The scheme aims to generate capital appreciation by investing primarily in midcap stocks. The investment universe would primarily comprise of companies that have a market capitalization ranging from Rs 300 to Rs 3000 crore, hence we classified under small cap segment.

Fund Performance: This fund has beaten its benchmark and provided 29% annualised returns in last 5 years. This fund gave 45% returns in the last 1 year which is the second highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 128,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 2.04 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 3.6 Lakhs. This fund gave amazing returns in 1 year beating its peers.

Why to invest: This fund has beaten its peers and given good returns in last 1 year and last 5 years. This fund is rated by Crisil as Rank-2 and Value Research Online as 3 Star. This fund risk grade is “Below Average” and Return Grade is “Average” as per Value Research Online. One of the best mutual fund in Small Cap segment to invest in 2017 for long term 8-10 years.

Bonus Tip – Top#6– Sundaram S.M.I.L.E. Mutual Fund


Best Small Cap Funds to invest in India in 2017 - Sundaram smile fund

The MF scheme aims to achieve capital appreciation by investing atleast 65 % in diversified stocks of  small and mid caps.

Fund Performance: This fund has beaten its benchmark and provided 28% annualised returns in last 5 years. This fund gave 37% returns in the last 1 year which is the 6th highest among the Small Cap funds. If one would have invested Rs 1,000 per month through SIP in this midcap fund for 5 years period, the investment would have been Rs 60,000 (1,000 x 60 months) and the fund value now would have been Rs 127,000. If you would have invested Rs 1 Lakh, 3 years back, your fund value now would have been Rs 1.9 Lakhs. If you would have invested Rs 1 Lakh, 5 years back, your fund value now would have been Rs 3.4 Lakhs. This fund gave amazing returns even in the last 3 months.

Why to invest: This fund has beaten its peers and given highest returns in last 1 year and last 5 years. This fund is rated by Crisil as Rank-3 and Value Research Online as 2 Star. This fund risk grade is “High” and Return Grade is “Average” as per Value Research Online.

Also Read: Best ELSS Tax Saving Mutual Funds for 2017-2018

Summary of all Top 5 Small Cap Mutual Funds of 2017


List of Top 5 Best Small Cap Funds to invest in 2017 in India

Conclusion: An investor should diversify their portfolio by investing in large cap, midcap and small cap funds. Smallcap funds would help you to get higher returns especially during bull runs. In a 10 year time frame, there could be 1 or 2 bull runs and these funds can provide amazing returns. High risk investors can invest 15% to 20% in small cap funds.

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Suresh

Top 5 Best Small Cap Funds to invest in 2017

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