5 Best Small Cap Mutual Funds to invest in 2020 in India

Best Small Cap Funds for 2020 - Top Mutual Funds to invest in IndiaTop 5 Best Small Cap Mutual Funds for 2020


Small Cap mutual funds have been under-performing in the last couple of years. I was indicating in various comments and articles that investors should not worry about short term performance. Currently, the small cap segment has bounced back in the last 4-5 months. Some of the small cap funds gave almost 33% returns in just 1 year. In this article we would provide some of the Best Small Cap mutual funds to invest in 2020 in India for the long term through SIP. 

Also Read: Best Midcap mutual funds to invest in 2020

What are Small Cap Mutual Funds?


Smallcap mutual funds in simple terms invests in smallcap stocks in India. Large cap stocks are from 1st to 100th in terms of market capitalization and midcap stocks are categorized as stocks from 101th  to 250th stock.  Any company which is 251+ in terms of market capitalization is termed as small cap and there are thousands of companies to invest. This provides a large scope to invest in a variety of companies

Experts believe that small cap stocks are future midcap and large cap stocks. Hence smallcap stocks have huge potential to grow your money. However, picking up a good small-cap stock is always a challenge. Here come small cap mutual funds. The Smallcap fund manager, who is expert would pick-up stocks for investment in such funds.

How we filtered these Best smallcap mutual funds in India to invest in 2020?


Like every year, even this year, we are recommending smallcap funds that can outperform in the coming years. Here are the list of parameters which we considered in short listing the smallcap mutual funds to invest in India.

1) We considered best performing smallcap funds in the last 10 years, 5 years, 3 years, 1 year and 3 months. The reason we considered short term performance is, this segment has been under performing in the last few years and hence short term performance provides that such funds can bounce back when the small cap segment is back.

2) We have short listed funds that performed well during various market cycles in the last 5-10 years.

3) These funds are rated by value research online as 3 star, 4 star and 5 star.

4) These funds have Assets under Management as > Rs 500 Crores.

Is there any change in the list where we indicated best small cap mutual funds to invest in 2019. There are a few changes we have done based on the recent trend and bounce back in this segment. However, if you have invested in those fuds, you can continue to invest in them

Best Small Cap Mutual Funds to invest in 2020


Here are the list of Small Cap mutual funds invest in India for the long term.

#1 – SBI Small Cap Fund

#2 – Axis Small Cap Fund

#3 – Nippon India Small Cap Fund

#4 – Kotak Small Cap Fund

#5 – ICICI Prudential Smallcap Fund

Now let us see the reasons why we need to invest in these small cap mutual funds now.

#1 – SBI Small Cap Fund


What is this Fund Investment Strategy?

SBI Small Cap Fund aims to provide investors with opportunities for long-term growth in capital by investing predominantly in a well-diversified basket of equity stocks of small cap companies.

The fund predominantly invests (minimum 65%) in small cap stocks.

SBI Small Cap Fund can also take up to 35% exposure in other equities (including large and mid-cap companies) and/or debt and money market instruments.

The fund follows a blend of growth and value style of investing and will follow a bottom-up investment strategy for stock selection.

How is the performance of this Small Cap mutual fund?

This fund has outperformed and gave 19% annualized returns in the last 10 years, 14% annualized returns in the last 5 years and 15% annualized returns in the last 3 years. In the short term, it gave 20% returns in the last 1 year and 19% returns in the last 6 months.

This fund gave highest SIP returns. If one would have done SIP for Rs 1,000 per month for 10 years, the investment would have been Rs 1.2 Lakhs and such fund would have now grown to Rs 3.56 Lakhs. Similarly, if one would have invested Rs 1,000 per month for 5 years, the investment would have been Rs 60,000 and such amount would have now grown to Rs 83,000.

We are providing the NAV Chart (source: value research) of this mutual fund scheme and comparison with its benchmark. This would help you to assess how the fund has performed in the last 5-10 years and how it is compared to its benchmark index. Fund performance should be always higher compared to index which provides that the fund can deliver higher returns.

SBI Smallcap Fund - NAV Chart - 2010 to 2020 Performance

Why should you invest in this smallcap fund?

This fund has given 18% annualized return since inception. This fund has 0.85 Beta which indicates low volatility compared to benchmark. This fund bounced back as soon as smallcap stocks performing well. Considering its long standing performance in the last 5-10 years, this can be considered as one of the best small cap mutual fund to invest in 2020.

#2 – Axis Small Cap Fund


What is this Fund Investment Strategy?

To generate long-term capital appreciation from a diversified portfolio of predominantly equity & equity related instruments of small cap companies.

How is the performance of this Small Cap mutual fund?

This fund has outperformed and gave 13% annualized returns in the last 5 years and 16% annualized returns in the last 3 years. In the short term, it gave 33% returns in the last 1 year and 26% returns in the last 6 months.

This fund gave highest SIP returns. If one would have done SIP for Rs 1,000 per month for 6 years and 2 months (since inception), the investment would have been Rs 72,000 and such fund would have now grown to Rs 1.26 Lakhs. Similarly, if one would have invested Rs 1,000 per month for 5 years, the investment would have been Rs 60,000 and such amount would have now grown to Rs 87,000.

We are providing the NAV Chart (source: value research) of this mutual fund scheme and comparison with its benchmark. This would help you to assess how the fund has performed in the last 5-10 years and how it is compared to its benchmark index. Fund performance should be always higher compared to index which provides that the fund can deliver higher returns.

Axis Small cap Fund - NAV Chart - 2010 to 2020 Performance

Why should you invest in this smallcap fund?

This fund has given 22% annualized return since inception. This fund has 0.59 Beta which indicates low volatility compared to benchmark. This fund bounced back as soon as small cap stocks performing well. Considering its long standing performance in the last 5-6 years, this can be considered as one of the top performing small cap mutual fund to invest in India.

#3 – Nippon India Small Cap Fund


What is this Fund Investment Strategy?

The mutual fund scheme aims to generate long term capital appreciation by investing predominantly in equity and equity related instruments of small cap companies.

How is the performance of this Small Cap mutual fund?

This fund has outperformed and gave 11% annualized returns in the last 5 years and 9% annualized returns in the last 3 years. In the short term, it gave 10% returns in the last 1 year and 16% returns in the last 6 months.

This fund gave highest SIP returns. If one would have done SIP for Rs 1,000 per month for 9.5 years (since inception), the investment would have been Rs 1.13 and such fund would have now grown to Rs 2.85 Lakhs. Similarly, if one would have invested Rs 1,000 per month for 5 years, the investment would have been Rs 60,000 and such amount would have now grown to Rs 75,000.

We are providing the NAV Chart (source: value research) of this mutual fund scheme and comparison with its benchmark. This would help you to assess how the fund has performed in the last 5-10 years and how it is compared to its benchmark index. Fund performance should be always higher compared to index which provides that the fund can deliver higher returns.

Why should you invest in this smallcap fund?

This fund gave 16% annualized return since inception. This fund has 0.9 Beta which indicates low volatility compared to benchmark. This fund bounced back as soon as small cap stocks performing well. Considering its long standing performance in the last 5-9.5 years, this can be considered as one of the Top Small Cap mutual fund to invest in 2020.

#4 – Kotak Small Cap Fund


What is this Fund Investment Strategy?

The investment objective of Kotak Small Cap is to generate capital appreciation from a diversified portfolio of equity & equity related securities. The scheme predominantly invests in companies in the small cap market capitalization segment across sectors. The essence is to ‘spot them young and watch them grow’.

How is the performance of this Small Cap mutual fund?

This fund has outperformed and gave 14% annualized returns in the last 10 years, 9% annualized returns in the last 5 years and 8% annualized returns in the last 3 years. In the short term, it gave 20% returns in the last 1 year and 24% returns in the last 6 months.

This fund gave highest SIP returns. If one would have done SIP for Rs 1,000 per month for 10 years, the investment would have been Rs 1.2 Lakhs and such fund would have now grown to Rs 2.5 Lakhs. Similarly, if one would have invested Rs 1,000 per month for 5 years, the investment would have been Rs 60,000 and such amount would have now grown to Rs 75,000.

We are providing the NAV Chart (source: value research) of this mutual fund scheme and comparison with its benchmark. This would help you to assess how the fund has performed in the last 5-10 years and how it is compared to its benchmark index. Fund performance should be always higher compared to index which provides that the fund can deliver higher returns.

Why should you invest in this smallcap fund?

This fund has given 15% annualized return since inception. This fund has 0.78 Beta which indicates low volatility compared to benchmark. This fund bounced back as soon as small cap stocks performing well. Considering its long standing performance in the last 5-10 years, this can be considered as one of the best small-cap fund to invest in 2020.

#5 – ICICI Prudential Smallcap Fund


What is this Fund Investment Strategy?

The scheme seeks to generate capital appreciation by predominantly investing in equity and equity related securities of small cap stocks.

 How is the performance of this Small Cap mutual fund?

This fund has outperformed and gave 12% annualized returns in the last 10 years, 6% annualized returns in the last 5 years and 7% annualized returns in the last 3 years. In the short term, it gave 24% returns in the last 1 year and 17% returns in the last 6 months.

This fund gave highest SIP returns. If one would have done SIP for Rs 1,000 per month for 10 years, the investment would have been Rs 1.2 Lakhs and such fund would have now grown to Rs 2.15 Lakhs. Similarly, if one would have invested Rs 1,000 per month for 5 years, the investment would have been Rs 60,000 and such amount would have now grown to Rs 72,000.

We are providing the NAV Chart (source: value research) of this mutual fund scheme and comparison with its benchmark. This would help you to assess how the fund has performed in the last 5-10 years and how it is compared to its benchmark index. Fund performance should be always higher compared to index which provides that the fund can deliver higher returns.

ICICI Prudential Smallcap Fund - NAV Chart - 2010 to 2020 Performance

Why should you invest in this smallcap fund?

This fund gave 12% annualized return in the last 10 years. This fund has 0.87 Beta which indicates low volatility compared to benchmark. Considering its long standing performance in the last 5-10 years, this can be considered as one of the top 5 small mutual fund in 2020 to invest in India for the long term.

Performance, Ratings and Expense Ratios of these Small Cap Funds


Some FAQs about small cap mutual fund schemes


1) Is it safe to invest in smallcap mutual fund schemes?

Small cap fund’s investment objective is to invest in small cap stocks which are 250th + company in terms of market capitalization. Owning to this, these funds are high risk. If you are a high risk investor, you can invest in these funds.

2) What is the best small cap mutual fund?

There is nothing like a best small cap fund. One should pick-up small cap fund based on its investment objective, fund performance in various market cycles, ratings and how well it is being recovered when this segment is bouncing back. We have provided the list of best small cap mutual funds above which has been filtered based on these parameters.

3) Who should invest in these small cap funds?

These are high risk mutual fund schemes. If you are an aggressive equity investor who can take high volatility and risk and willing to invest for for long term (at least 8-10 years time frame), you can invest in these small-cap funds. I would recommend you invest atleast 3-5 funds from this list to avoid any under performance of a single fund.

You may like: Top 10 Largecap Mutual Funds to invest in India

4) Are small cap funds good investment now?

Small cap funds have been under performing in the last 1.5 to 2 years. However, these are bouncing back now in the last 4-5 months. Instead of timing the market, one should invest in small cap funds through SIP so that such short term volatility need not be worried.

5)  Which is the Best Small cap mutual fund for SIP?

SIP in mutual funds would help you to invest systematically in disciplined approach which can help you to reduce market volatility and provide higher returns in the long term. Hence the mutual funds listed indicated above can be considered as some of the best small cap mutual funds for SIP.

Disclaimer: These small cap funds do not offer guaranteed returns. Past performance may or may not repeat in future.

If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.

Suresh KP

Best Small Cap Mutual Funds to invest in 2020 in India

18 comments

  • Deepashri

    Hi Suresh Sir,
    I am planning to invest 8000 per month through SIP, I am ready to take risk in investment for high returns. My other investment are through EPF, SSY and NPS with contribution of 20000 monthly.
    Please suggest how many mutual funds shall I invest and whether I need to have more investment in mutual funds? What is ideal combination for me to achieve goals like child education in next 10 years around 30 lacs, Marriage of child in 15 year’s around 30 lacs and for retirement in 20-25 years.
    Suggest me good mutual funds and SIP amounts.

  • Savaeesingh

    Hi Suresh
    I am investing through SIP in following mutual funds. Can you please check and suggest any other fund I need to invest or any change is required in my investment.
    I want to create corpus of 35 lacs for child education in 10 years and 50 lacs post retirement in 24 years.
    Axis large Cap Funds
    Invesco India midcap
    Axis midcap
    Mirae assete aggressive hybrid
    Also I have NPS tier 1account

  • N.Mallikarjuna Rao

    My son want to invest 5k every month through sip for long term.Pls suggest some good funds for him for first time investment.

  • Vimal Prabhakaran

    Hi Suresh,

    I follow your recommendations for the last 4 years. It was really helpful. And I did the investments based on your recommendations and it gave very good returns. Thanks a lot!!!

    I have a query. All my investments are in funds offered by Axis Asset Management Company. Is there any risk associated to it?

    • Hello Vimal, Yes, it is high risk. Like I keep saying don’t invest in single AMC or single fund or single category. What happens if such things would collapse. Personally I am investing in 8-10 mutual funds from largecap, midcap, small cap etc., and from different AMCs. This way I am diversified.

Leave a Reply to Vimal Prabhakaran Cancel reply

Your email address will not be published. Required fields are marked *