SBI Small Cap Fund has consistently delivered impressive returns since its inception. For investors seeking long-term growth, particularly in small cap stocks, this fund has emerged as a top choice. Over the last 15 years, it has not only generated significant returns for those who made a lump sum investment but also provided a substantial boost for SIP investors. Let’s explore how this fund performed and why it has become a popular choice for investors aiming for high returns.
Stellar Growth: 1 Lakh Becomes Over 18 Lakhs
SBI Small Cap Fund has transformed investments over the past 15 years with an impressive Compound Annual Growth Rate (CAGR) of 21.43%. Here’s how a lump sum investment of Rs 1 lakh would have grown over different periods:
- In 15 years: Rs 18,35,290 (CAGR: 21.43%)
- In 5 years: Rs 3,77,190 (CAGR: 30.35%)
- In 3 years: Rs 1,91,400 (CAGR: 24.14%)
- In 1 year: Rs 1,37,410 (CAGR: 37.29%)
If someone had invested Rs 1 lakh in SBI Small Cap Fund 15 years ago, it would now be worth more than Rs 18 lakh, meaning the investment would have multiplied over 18 times!
Amazing Returns for SIP Investors: 7.65 Times Growth in 15 Years
For SIP (Systematic Investment Plan) investors, the returns from the SBI Small Cap Fund have also been extraordinary. For those who invested just Rs 3,000 monthly over 15 years, the outcome is impressive:
- Monthly SIP: Rs 3,000
- Total Investment (15 years): Rs 5,40,000
- Fund Value (after 15 years): Rs 41,30,874
- Return: 7.65 times growth, with an annualized return of 24.13%
This shows that even small, consistent investments through SIP can grow significantly over time in this fund. The total investment of Rs 5.40 lakh has grown to over Rs 41 lakh in 15 years.
Strong Performance History of SBI Small Cap Fund
SBI Small Cap Fund has consistently been one of the best performers in the small cap category, attracting long-term investors looking to benefit from the growth of small cap companies. The fund follows a well-balanced strategy of growth and value investing, focusing on high-potential small cap stocks while maintaining risk management.
The fund has delivered excellent returns over different periods, making it one of the top small cap mutual funds in India. Whether through lump sum investments or SIPs, it has helped investors build significant wealth over time.
Investment Strategy: Balancing Growth and Value Stocks
The fund’s managers, R Srinivasan, Pradeep Kesavan, and Mohan Lal, have a strong track record in the financial services sector. They follow a bottom-up strategy for stock selection, focusing on long-term wealth creation. The managers aim to strike a balance between growth stocks, which may show rapid price appreciation, and value stocks, which are undervalued but have potential for future growth.
This strategic balance allows the fund to capture growth opportunities while minimizing risk. Additionally, they are mindful of the volatility that comes with small cap stocks and aim to select stocks that offer growth potential with manageable risks.
Asset Allocation: Heavy Focus on Small Cap Stocks
According to SEBI guidelines, at least 65% of a small cap fund’s portfolio must be invested in small cap stocks. However, SBI Small Cap Fund has invested even more, allocating 93.14% of its total assets to equity as of August 31, 2024. Out of this, 84.98% was allocated to small cap stocks, while mid cap stocks accounted for 4.37%. The remaining 6.86% was kept in cash and cash-equivalent assets.
This high exposure to small cap stocks allows the fund to capture growth opportunities in emerging companies that have the potential for rapid expansion. By allocating a small percentage to mid cap and cash-equivalent assets, the fund also maintains liquidity and stability to some extent.
Top 5 Equity Holdings in SBI Small Cap Fund
Here are the top 5 stocks in the portfolio of SBI Small Cap Fund, representing sectors with strong growth potential:
- Kalpataru Projects International Ltd. – 3.67%
- GE T&D India Ltd. – 3.63%
- Finolex Industries Ltd. – 3.26%
- Blue Star Ltd. – 3.15%
- Whirlpool of India Ltd. – 2.87%
These stocks reflect the fund’s focus on companies that have the potential to grow rapidly, making them ideal for long-term investors.
Sector Allocation: Capital Goods and Financial Services Dominate
The fund’s sector allocation also plays a critical role in its performance. As of the latest update, here’s the breakdown of sector-wise investment in SBI Small Cap Fund:
- Capital Goods: 17%
- Financial Services: 14.48%
- Consumer Durables: 12.99%
- Consumer Services: 11.96%
- FMCG (Fast-Moving Consumer Goods): 8.22%
- Construction: 7.8%
These sectors represent industries that are expected to grow rapidly, providing opportunities for higher returns in the long run. The fund’s exposure to these industries, especially capital goods and financial services, reflects the fund managers’ confidence in their future potential.
Risk Factor: Small Cap Funds Come with High Volatility
While SBI Small Cap Fund has delivered impressive returns, it’s important to remember that small cap funds are considered high-risk investments. Due to the nature of small cap stocks, they tend to be more volatile and experience sharp fluctuations in the short term. This makes them a better option for investors with a high risk tolerance and a long-term investment horizon.
Investors should also note that past performance is not indicative of future returns. While the fund has performed well historically, market conditions can change, and future returns may vary.
(Disclaimer: The purpose of this article is only to provide information, not to recommend investment. Take any investment decision only after consulting your investment advisor.)
