What Makes Nippon India Small Cap Fund a Top Choice for Beginners
Introduced on September 5th, 2010, Nippon India Small Cap Mutual Fund has rapidly gained recognition as the top performer in the Equity Mutual Fund sector. Having an impressive Asset Under Management (AUM) of ₹ 60,372.50 Cr as of 2024, this fund has demonstrated top-level consistency in producing high returns. In this article, we will analyse what makes Nippon India small cap fund a top choice for beginners.
Return Comparison: Fund vs Category and Benchmark
The Nippon India Small Cap Fund is a popular choice among beginners due to its steady performance. The fund has a history of performing better than its benchmark and peers in the long run.
When this fund was introduced in 2010, investing in this fund for 5 years would have yielded an average annual return of around 38.70%. Now, let’s contrast it with the Nifty Small Cap 250 TRI index as a benchmark. This benchmark provided only an 18.51% yield.
Although small-cap investments are typically risky, this fund has shown strength and the potential to generate significant profits, especially for investors with a long-term outlook. This can offer beginners a sense of assurance as their investments are being effectively handled.
Rolling Returns of the Fund
| Schemes | Max | Min | Average | Standard Deviation |
| Nippon India Small Cap Fund | 26.98 | 16.42 | 22.13 | 2.09 |
| Category Average | 22.12 | 11.40 | 17.32 | 2.52 |
| Nifty Smallcap 250 – TRI | 17.80 | 5.64 | 13.05 | 2.28 |
Balancing Risk and Reward
The Nippon India Small Cap Fund experienced a decline over a recent 6-month period, yet it outperformed the average performance of similar funds in the Equity Mutual Fund category.
This indicates that the fund has performed well, demonstrating more consistent returns and being less impacted by fluctuations in the market.
The Nippon India Small Cap Fund has a standard deviation of 14.63% in its risk analysis, demonstrating high volatility. With a Sharpe Ratio of 1.65, it provides favorable returns relative to the level of risk involved.
The fund’s ability to benefit from market increases is shown by its upside capture ratio, surpassing that of its benchmark. Meanwhile, its downside capture ratio indicates it incurs lower losses compared to the benchmark during market declines. In general, the fund experiences volatility yet delivers robust risk-adjusted returns.
Diversified Portfolio
The fund’s diversified portfolio is another factor that makes it appealing to beginners. The Nippon India Small Cap Fund invests across various sectors, including financial services, consumer goods, healthcare, and industrials.
The AUM of the Nippon India Small Cap Fund exceeds 50,000 crores, which is quite remarkable. 95.93% of the fund’s portfolio is invested in stocks, primarily in equities.
The fund’s equity investments are spread out among various market capitalization sizes:
● 52.94% invested in small-cap stocks
● 11.61% invested in mid-cap stocks
● 6.88% invested in large-cap stocks
The fund also maintains a minor allocation, 4.05%, in cash and cash equivalents. This aids in providing liquidity and controlling market volatility.
Experienced Fund Management
The success of any mutual fund largely depends on the expertise of its management team. The fund we’re discussing is well managed by Mr Samir Rachh who has over 30 years of experience in finance.
For the past 7 years, he has gained recognition as an expert in small-cap investments while overseeing Nippon India Small Cap Mutual Funds. During his guidance, this program has consistently surpassed its competitors and benchmarks in the past year.
The Bottom Line
The Nippon India Small Cap Fund stands out as a top choice for beginners due to its strong track record, expert management, and strategic approach to small-cap investing. By carefully considering your financial goals and risk tolerance, this fund could be a valuable addition to your investment portfolio.