Noted rating agency, CRISIL rates equity mutual funds on various parameters. It rates equity mutual funds on the basis of mean return and volatility, exposure to sensitive sectors, liquidity analysis, portfolio concentration analysis etc. Based on this it arrives at a ranking. We have picked equity funds from the small cap category where the rankings are 1 or No 2.
4 top ranked funds from the small cap space
|Name of the fund||Ranking||1-year returns||3-year returns|
|Kotak Small Cap Fund||No 1||106.92%||27% (annualized)|
|Axis Smallcap Fund||No 2||84.68%||27.82% (annualized)|
|Nippon India Smallcap Fund||No 2||99.05%||21.03% (annualized)|
|Union Small Cap Fund||No 2||84.30%||22.46% (annualized)|
The ranks are assigned on a scale of 1 to 5, with CRISIL Fund Rank 1 indicating ‘very good performance’. In any peer group, the top 10 percentile of funds are ranked as CRISIL Fund Rank 1 and the next 20 percentile as CRISIL Fund Rank 2.
Should you invest in these small cap mutual fund through SIPs?
We believe that it is not the best time to invest in small caps, given the way they have run-up sharply. In fact, the markets as a whole are expensive. However, many would argue that it is through SIPs and to an extent the risk is hedged. However, the logic is I am buying at into an SIP with the NAV almost doubling in the last 1-year, if you look at the 1-year returns.
Having said that in the case you would still like to go with SIPs of small cap funds, we suggest that you look at small amounts. For example, if you desire to park in an SIP with a sum of Rs 10,000, you may want to do so with Rs 5,000 to begin with.
Stock markets remain expensive
The markets are expensive at these levels and according to a report y broking firm Motilal Oswal, the Nifty is trading at significant premium of almost 15% to long-term averages. So, we would request investors to be a little cautious and avoid jumping onto the bandwagon. However, we have also to point out that investors at the moment do not have too many investment options with interest rates at all times lows on FDs and gold and real estate going nowhere.
The ranking from the mutual funds mentioned in this story are taken from CRISIL. Please do consult a professional advisor before you invest in mutual funds. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article. Caution needs to be exercised as mutual funds are subject to risks associated with the stock markets.