A few mutual fund houses, over recent years, had increasingly stopped inflows in small- and mid-cap mutual funds, in cases where their size became too large for them to manage. After the fall of stock prices of many small- and mid-cap companies this year, mutual fund houses feel that many such companies are now available at attractive valuations. Hence several small cap mutual funds who had restricted new purchases in their funds are now accepting investments again.
Smallcap schemes bet on small companies with high growth potential. These schemes can give you higher returns but they are more vulnerable to negative market movement than large- and mid-caps. Smallcap schemes are risky and volatile, but they also have the potential to offer higher returns over a long period.
Hence if you have a long-term investment horizon and a high risk appetite, you can invest a part of your portfolio in smallcap schemes to earn higher returns over longer time periods, however be selective and invest in the right ones.
The table below shows the historical returns of the some of the top performing small cap mutual funds
| Name of the Fund | 1 year return (%) | 3 year return (%) | 5 year return (%) | Return since inception (%) |
| SBI Small Cap Fund (Erstwhile SBI small & Midcap) | 17.38 | 21.96 | 36.95 | 20.96 |
| DSP Small Cap Fund (Erstwhile DSPBR Microcap) | -0.06 | 14.25 | 34.15 | 17.21 |
| L&T Emerging Businesses Fund | 9.19 | 23.77 | – | 25.85 |
| HDFC Small Cap Fund | 20.58 | 22.01 | 26.02 | 15.58 |
| Reliance Small Cap Fund | 13.30 | 22.87 | 38.74 | 20.55 |
Source: Value Research, 5th September, 2018
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