The HYPE about SBI Small Cap Fund - Invest or Avoid?


Lots of buzz going around regarding SBI renewing new SIP's subscriptions into their best performing fund, SBI Small cap Fund - Erstwhile SBI Small & Midcap Fund. Earlier in 2015, all fresh subscriptions were stopped.

SEBI Mutual Fund Recategorization

As per the new SEBI Guidelines, each AMC is allowed to have only one fund for each category & small & midcap category does not exists anymore. This is the reason why this fund has been renamed to SBI Small Cap Fund.

The new SEBI mandate defines a ‘small cap’ fund as a fund investing at least 65% of its assets in companies smaller than the top 250 by market capitalisation. Which basically means, a lot of reallocation will be done as part of each mutual fund type. Equity mutual fund categories for your portfolio

SBI Small cap Fund

Let's look at why investors want to jump onto SBI Small cap Fund?

Here are the trailing returns - as on 22 May, 2018. Source : Value Research Online

sbi small cap fund returns

The SBI Small cap fund has been one of the best performer in the small & mid cap space in the last 3 to 5 years. Let's also accept the fact that last 5 years have been the best time for the bull market. 

If you had a look at this chart in January 2018 - 1 year returns for this fund were close to 80% - Yes, I'm not Joking!!

Look at the Q on Q performance in 2017. Source : Economic Times
If you look at Q4, this fund gave a stellar return on 27%.

We also need to analyse the reason for this. The period of 2017 had seen highest inflows into mutual fund schemes & specially small and midcap schemes. This is the reason due to which markets valuation was at an all time high & most of the stocks were trading at their 52 week highs. Must Read - Chasing past returns in a mutual fund might be bad idea

Very little did the investors realize these kind of returns were not sustainable & most of them bailed out in Q1 2018. Now let's look at the returns in relative terms. Here is the snapshot of another best performing small cap fund, Reliance Small Cap Fund - the returns were much in line with the SBI Small cap. Source : Economic Times


Should you invest?

Any investor who wants to invest in small or midcap space needs to define a time horizon for the investment. If your investment horizon is more than 7 years - you should invest only through SIP - The magical recipe for financial success

Don't be in a hurry to latch up SBI Small cap fund. The recent SEBI guidelines has forced many funds to reallocate their portfolios & we need to adopt a wait and watch approach to see who emerges as the leader. If you're still looking for best investment options in small cap space, opt for Reliance Small Cap Fund, which has a proven record of delivering good returns.

Mutual funds as an investment instrument has been gaining popularity over the years, thanks to the wide range of options available and the ease of KYC process. To know more about them, check out The Mutual Funds Sahi Hai campaign, launched by The Association of Mutual Funds in India (AMFI) at

Still have any questions or feedback on the article, don't forget to share it in the comments section below.

1 comment:

  1. Sip weekly or monthly ? what is the good frequency? Or twice a month?


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