Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now

You can switch off notifications anytime using browser settings.
Stock Analysis, IPO, Mutual Funds, Bonds & More

SBI Small Cap Fund: Fund review

Historically, it has been observed that small-sized companies tend to do well — many a time outperforming large-cap companies — when earnings rally kicks in.

, ET Bureau|
Nov 05, 2019, 09.46 AM IST
Getty Images
risk factor
After a massive underperformance of the BSE Small Cap index to Sensex since January 1, 2018 to August 31, 2019 by 45%, the trend seems to have reversed. In the past two months, BSE 500, BSE Midcap and BSE Smallcap indices have returned 10.3%, 12.2% and close to 10%, respectively, outperforming the Sensex’s 9.7%. Before September, 80% stocks of the BSE 500 index were in the red — indicating a broader market rally. Hence, it makes sense to increase exposure to quality small cap schemes.

Historically, it has been observed that small-sized companies tend to do well — many a time outperforming large-cap companies — when earnings rally kicks in. Investors who believe in this historical trend can consider investing in small cap schemes. But it may take a long time for this trend to materialise. Hence, such investors need to exercise patience and have an investment horizon of 5 to 10 years. The reasons include markets being at all-time highs and earnings recovery remains uncertain, at least in the foreseeable future.

Among the small cap schemes, investors can consider SBI Small Cap Fund. The scheme has been a stellar performer, beating its benchmark and peers by a fair margin. In the past 5- and 10-year periods, the scheme has given 17% and 18% returns, while its peer schemes are way behind as they have given returns of 8% and 13% during the same periods, respectively. Fund manager R Srinivasan is known to spot small cap companies with good management quality, and stable return ratios. This scheme is recommended for investors who believe in market wisdom of high risk fetches high rewards.

Portfolio change (past 6 months)
New Entrants Complete Exits Increase in Allocation
Axis Bank Indian Energy Exchange Dixon Technologies (I)
Can Fin Homes Aavas Financiers Kirloskar Oil Engines
Carborundum Universal Gujarat Pipavav Port Hawkins Cookers

Returns (in %)
Period CAGR Return SIP CAGR Return Small Cap- Average CAGR Return (%)
1 Year 10.05 9.43 1.94
3 Year 10.40 5.67 2.75
5 Year 17.51 12.23 8.58

Returns peer comparison (in %)
Scheme Name 1 Year 3 Year 5 year
Axis Small Cap Fund 23.42 10.82 12.44
HDFC Small Cap Fund -5.06 8.08 10.58
L&T Emerging Businesses Fund -4.63 6.39 11.92
Source: Accord Fintech, Compiled by ETIG Database

Expert Take
Kaustubh Belapurkar, Director Fund Research, Morningstar India
Fund manager R Srinivasan uses a bottom-up approach and looks at investing in high quality companies with strong managements. While he primarily looks for growth stocks, he is conscious of valuations and will wait for suitable entry prices for portfolio picks. The team invests in nondisruptive business with strong cash flows and a proven track record.
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links

Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service