SBI Small Cap Fund: A high growth investment opportunity for long-term investors

SBI Small Cap Fund is an open-ended equity mutual fund scheme that primarily invests in small-cap companies with a market capitalization of less than Rs. 5,000 crores. The fund launched on September 9, 2009 and since then it has delivered a strong performance in the mutual funds in same field and age. The fund aims to generate long-term capital appreciation for investors by investing in high-quality small-cap companies with good growth potential.

Performance Analysis
Over the once 10 times, the SBI Small Cap Fund has delivered an annualized return of19.68, outperforming its standard indicator, the S&P BSE Small Cap TRI, which delivered an annualized return of17.05. The fund has also outperformed the broader request standard, the S&P BSE Sensex, which delivered an annualized return of13.23 over the same period.   The fund has performed exceptionally well in the once many times. For case, in the time 2021, the fund delivered a return of101.83, while its standard indicator delivered a return of104.24. Still, it's worth noting that this isn't a harmonious performance, and the fund has endured a fair quantum of volatility in the history.

Risk Analysis
As a small- cap fund, the SBI Small Cap Fund is innately unsafe than large- cap or mid-cap finances. Small- cap stocks tend to be more unpredictable and can witness lesser price swings than larger companies. Thus, investors in this fund should be prepared to accept an advanced position of threat than those investing in large- cap or mid-cap finances.   The fund’s threat profile can also be anatomized using its standard divagation, which is a measure of the fund's volatility. The SBI Small Cap Fund has a standard divagation of 25.76, which is significantly advanced than the standard divagation of the standard indicator, which is 21.26. This indicates that the fund is more unpredictable than its standard indicator.

Portfolio Analysis:

As of April 30, 2023, the SBI Small Cap Fund had assets under management (AUM) of Rs. 6,605 crores. The fund's portfolio is well-diversified with investments spread across various sectors. The following table shows the sector-wise allocation of the portfolio:

Sr. No.	Sector	Allocation
01.	Engineering	18.80%
02.	Chemicals	12.30%
03.	Textiles	9.90%
04.	Services	9.70%
05.	Consumer Durables	8.50%
06.	Auto Ancillaries	7.60%
07.	Pharma	7.20%
08.	FMCG	6.90%
09.	Cement & Construction	5.60%
10.	Retailing	4.40%
11.	Others	9.10%

 

The top five holdings in the portfolio as of April 30, 2023, were Amber Enterprises India Ltd., RBL Bank Ltd., SRF Ltd., Coromandel International Ltd., and Tata Elxsi Ltd., which accounted for approximately 16.6% of the fund's assets.

Expense Ratio:
The SBI Small Cap Fund has an expenditure rate of 2.31% which is advanced than the average expenditure rate for small-cap mutual fund in India. Still, this isn't unanticipated, as small-cap mutual fund generally have advanced expenditure rates due to the advanced exploration and analysis costs associated with investing in  lower companies.

Fund Managers:
The SBI Small Cap Fund is managed by Mr. R. Srinivasan, who has been with SBI Mutual Fund since 2003. He has more than 20 years of experience in equity market research and fund operation. He's supported by Mr. Dinesh Balachandran, who has been with SBI Mutual Fund since 2007 and has more than 14 years of experience in equity based market research and fund operation.

Historical Return Table:

 

The following table if for reference which displays past years returns of the SBI Small Cap Fund for different periods along with the returns of its standard benchmark index, the S&P BSE Small Cap TRI and the broader benchmark index, the S&P BSE Sensex:

Sr. No.	Period	SBI Small Cap Fund	Benchmark	S&P BSE Sensex
01.	1 Year	106.54%	1.1109	46.51%
02.	3 Years	31.25%	0.261	11.43%
03.	5 Years	23.27%	0.1928	12.88%
04.	10 Years	19.68%	0.1705	13.23%

 

SIP Returns:
Systematic Investment Plan (SIP) is a popular investment option that allows investors to invest a fixed amount of money at regular intervals. The following table shows the returns generated by investing in SBI Small Cap Fund through SIP for different periods, assuming a monthly investment of Rs. 1,000:

Sr. No.	SIP Tenure	Total Investment	Expected Returns	Final Value
01.	5 Years	Rs. 60,000	23.27%	Rs. 97,498
02.	10 Years	Rs. 1,20,000	19.68%	Rs. 4,03,213

The above returns are based on historical performance and are subject to market risks. The actual returns may be different on the basis of investment and the market position and other factors relevant to the mutual fund portfolio.

Ways of Investment:

Investors can invest in SBI Small Cap Fund through various modes, including:

01.Systematic Investment Plan (SIP) 

02.Lump sum investment

03.Systematic Transfer Plan (STP)

04.Systematic Withdrawal Plan (SWP)

05.Direct Plan and Regular Plan

Investors can choose the investment mode on the basis of their future plans and investment goals, risk appetite and investment horizon.

The SBI Small Cap Fund has delivered strong performance over the decade, outperforming its standard indicator and the broader request. Still, the fund's advanced volatility and threat profile mean that it may not be suitable for all investors. It's essential to understand the fund’s pitfalls and to invest in it with a long- term investment horizon. Also, investors should estimate the fund's performance and charges against other small- cap finances to determine whether it's the right investment for their portfolio. However, Investors should aware that small cap mutual funds are high risk investments segment and may be subject to high volatility than large cap funds.

**Note: This article is just for information. It’s advisable to consult a finance expert before making any investment decision.

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