Last Updated on December 29, 2021 at 5:21 pm
This is a performance review of Nippon India Small Cap Fund (formerly Reliance Small Cap Fund). We also consider for the comparison category peers like Axis Small cap fund, HDFC Small cap fund and SBI Small cap fund.
Reliance Small Cap Fund was launched in Sep 2010 with a mandate to invest 65%-100% of small cap companies. I re-branded itself as a ‘proper’ small cap fund from April 2018 after the SEBI categorization rules without significant deviation in its mandate.
A month before, in March 2018, with its AUM having grown quickly to 6300+ crores, the fund stopped lump sum investments and allowed only SIPs. From October 2019, the SIP investment limit was hiked from Rs. one lakh to Rs five lakh. The ‘no lump sum’ restriction remains. Kudos to Nippon India Mutual Fund for an easy-to-navigate notices page.
Shown below is the asset allocation history of Nippon India Small cap fund clearly showing its small cap tilt even before the SEBI categorization rules.
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This is the last three-year performance of the fund compared with two small cap benchmarks. Notice that although the fund peaked during the small cap rally when the fall began in early 2018, it was able to limit the fall and has also reacted well to the uptick over the last few months.
Next, we shall consider every possible five-year and seven-year return periods since the inception of the fund. We shall also include category peers reviewed earlier:
- Axis Small Cap Fund Review
- HDFC Small Cap Fund Review (this does not have a long enough history as a small cap fund so judge it appropriately)
- SBI Small Cap Fund Review
- Also see: DSP Small Cap Fund: Is this any good anymore?
Shown below are 1085 5-year data points in each coloured line covering an observation window (range of horizontal axis) of about four years.
If we increase the duration, the number of data points drop significantly. We have only 598 seven-year data points. The observation window drops to less than three years.
In both durations, Nippon Small Cap has done fairly well (though second in place to SBI Small cap).
In summary, Nippon India has a good since-inception track record as a small cap fund and has been nimble enough (perhaps aided by restriction in inflow) to react to changes in the small cap space. It would perhaps serve the AMC and existing investors well if the restriction continue.
While I generally am against the need for a separate small cap fund, those looking for such an adventure and do not mind investing only via SIP can consider Nippon India Small Cap Fund.
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