Top Small Cap Mutual Funds for Nov 2024 Based on 5-Year CAGR

Investing in small-cap mutual funds can be a great way to achieve high growth, especially for investors willing to take on a bit more risk in search of higher returns. Small-cap funds invest primarily in smaller companies with high growth potential but are often more volatile than large-cap or mid-cap stocks. Let’s look at some of the best-performing small-cap mutual funds this November based on their 5-year Compound Annual Growth Rate (CAGR). 

In this blog, we’ll review the top funds, consider their expense ratios, Assets Under Management (AUM), and Price-to-Earnings (PE) ratios, and analyse why they stand out in the current market.

Why Small Cap Mutual Funds?

Small-cap mutual funds focus on companies with smaller market capitalisations, typically under ₹5,000 crore. These companies are often in the growth stage, providing an opportunity for substantial returns if they perform well. For investors with a higher risk appetite and a long-term investment horizon, small-cap funds can be an attractive choice.

However, it’s important to note that small-cap funds are generally more volatile due to their exposure to smaller, potentially less stable companies. These funds might also underperform in turbulent markets. That said, long-term investors can benefit significantly from small-cap funds if they can ride out the volatility.

Top Small Cap Funds for November 2024 

Note: The best small-cap funds in India provided here are as of October 31, 2024. The Small Cap Funds are sorted based on the 5-yr CAGR.  

Overview of Top Small Cap Funds for November 2024 

1. Quant Small Cap Fund

Quant Small Cap Fund stands out with an impressive 1-year absolute return of 51.95% and a high NAV of ₹288.89. Its minimum lump-sum investment is ₹5000, and the SIP starts at ₹1000, offering flexibility for regular investments. With a 1% exit load, this fund focuses on high-growth small-cap companies, making it suitable for investors looking for aggressive returns over a longer investment horizon.

2. Bank of India Small Cap Fund

Bank of India Small Cap Fund provides a strong 1-year absolute return of 44.22% with an affordable NAV of ₹53.42. It has a minimum lump-sum investment requirement of ₹5000 but no minimum SIP, giving investors flexibility. The 1% exit load applies if investments are withdrawn early. Focused on small-cap stocks, this fund is ideal for those seeking to gain from emerging companies in India’s growth sectors, though it is suited for those with high-risk tolerance.

3. Nippon India Small Cap Fund

Nippon India Small Cap Fund has delivered a solid 1-year absolute return of 45.36%, with an NAV of ₹194.33. It offers high accessibility, no minimum lump-sum investment requirement, and a low SIP starting at ₹100. An exit load of 1% is applied for early withdrawals. With a diverse portfolio in small-cap stocks, this fund appeals to investors seeking capital appreciation from India’s burgeoning companies, suitable for those willing to weather short-term volatility for long-term gains.

4. Canara Robeco Small Cap Fund

Canara Robeco Small Cap Fund has achieved a 1-year absolute return of 39.83% and has an NAV of ₹43.92. Requiring a ₹5000 minimum lump-sum investment and a ₹1000 minimum SIP, this fund maintains a 1% exit load. It invests in small-cap companies poised for growth, making it appealing to investors who seek moderate risk with exposure to promising small-cap segments. The fund’s conservative approach within the high-growth small-cap sector stabilises its performance.

5. Tata Small Cap Fund

With a 1-year absolute return of 50.49% and an NAV of ₹47.50, Tata Small Cap Fund stands out in performance. It requires no lump-sum investment, and the minimum SIP starts at ₹1500, providing entry points for regular investors. The fund has a 1% exit load for redemptions within a year. Tata’s focus on small-cap growth opportunities makes this fund suitable for risk-tolerant investors looking to capitalise on India’s expanding small-cap market.

6. Edelweiss Small Cap Fund

Edelweiss Small Cap Fund delivers a 1-year absolute return of 43.66%, with an NAV of ₹48.65. The fund is accessible with a low ₹100 lump-sum requirement and an affordable SIP starting at ₹100. A 1% exit load applies for short-term withdrawals. With a focus on small-cap companies, Edelweiss aims for growth by investing in emerging businesses, making it attractive for long-term investors seeking high growth potential within India’s small-cap ecosystem.

7. Invesco India Smallcap Fund

Invesco India Smallcap Fund has a strong 1-year absolute return of 52.01% and an NAV of ₹44.63, making it a top performer. The fund requires a minimum lump-sum investment of ₹1000, with no minimum SIP requirement, and has a 1% exit load. Invesco’s targeted approach within the small-cap sector aims for high growth potential, making it an excellent option for investors willing to take on more risk for robust returns over the long term.

8. Kotak Small Cap Fund

Kotak Small Cap Fund offers a 1-year absolute return of 44.37% with a high NAV of ₹318.89. It is accessible with a minimum ₹100 lump-sum investment and a low ₹100 SIP, along with a 1% exit load. The fund primarily invests in small-cap companies with high growth potential, making it ideal for investors who can tolerate market volatility in pursuit of long-term capital appreciation. Kotak’s established management adds credibility to this fund’s performance.

9. HSBC Small Cap Fund

HSBC Small Cap Fund provides a 1-year absolute return of 41.29% and has an NAV of ₹94.42. Requiring a minimum lump-sum investment of ₹5000 and a SIP starting at ₹500, it also has a 1% exit load for early withdrawals. This fund targets promising small-cap companies, making it appealing for those seeking to diversify their portfolio into high-growth areas. HSBC’s global brand and experienced fund managers lend confidence to its investment strategy.

10. DSP Small Cap Fund

DSP Small Cap Fund has posted a 1-year absolute return of 38.14% with an NAV of ₹211.59. The fund is accessible with a minimum ₹100 lump sum and no minimum SIP requirement, along with a 1% exit load. It invests in high-growth small-cap stocks, making it suitable for investors with a high-risk appetite looking for long-term gains. DSP’s reputation and structured investment approach make it a viable option for exposure to India’s growing small-cap sector.

What is CAGR and Why it Matters

CAGR (Compound Annual Growth Rate) is a valuable metric for investors because it shows an investment’s mean annual growth rate over a specified period, assuming that profits are reinvested at the end of each period. For small-cap mutual funds, the 5-year CAGR offers insight into a fund’s past performance, helping investors assess consistency and growth potential.

Factors To Consider Before Investing in Small-Cap Funds

Here are key factors to consider before investing in small-cap funds:

1. Risk Tolerance: Small-cap funds are volatile, so they suit investors comfortable with high-risk.
2. Investment Horizon: A long-term perspective (5+ years) is essential to weather market fluctuations.
3. Fund Performance: Assess historical returns, focusing on 3- and 5-year performance for consistency.
4. Expense Ratio: Lower expenses improve net returns; choose funds with competitive fees.
5. Exit Load: Check exit load fees, which apply if you withdraw early.
6. Fund Manager Expertise: Experienced managers are crucial in navigating volatile small-cap markets.
7. Market Cycles: Small caps perform well in growth phases; consider the current economic cycle.

Conclusion

Choosing the right small-cap mutual fund can be a game-changer for investors looking to tap into high-growth sectors. While each fund on this list has its strengths, investors should consider not only the 5-year CAGR but also factors like expense ratios, AUM, and PE ratios. These additional metrics can provide insights into a fund’s cost-effectiveness and potential value.

For November 2024, funds like Quant Small Cap Fund and Bank of India Small Cap Fund stand out with their high CAGR and competitive expense ratios. Ultimately, the best choice depends on your risk tolerance, investment horizon, and financial goals. Always conduct thorough research or consult a financial advisor before making investment decisions.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.