SBI Small Cap Fund Review: A solid performer in the small cap segment

Published: February 3, 2019 at 10:53 am

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A review of  SBI Small Cap Fund previously called SBI Small & Midcap fund. The small cap mutual fund space is an adrenalin filled rough ride not suited for many. Spectacular returns in a short time is often followed by extended periods of meagre returns. This segment is most sensitive to AUM increases as the stock universe is rather limited. Funds have found it necessary to completely or partially stop inflow. SBI Small Cap Fund with only an AUM of about 1450 crores is no exception.

Regular readers maybe aware that I have been against investing in small cap funds and my Handpicked Mutual Funds January 2019 (PlumbLine) has none.Therefore please interpret the following as an analysis and not investment advice. I think any good mid cap fund will have all the small cap stocks that one ever needs in a portfolio. Before you assume investing in mid caps or small stocks is a better bet over the long term, check out these results: Large Cap vs Mid Cap vs Small Cap Funds: Which is better for long term investing?

SBI Small Cap Fund: Review

If you do wish to consider SBI Small Cap for investment, do so only if you do not have a small cap fund in your portfolio. Kindly note I shall take no responsibility for your investment gains or losses if you choose to invest in this fund or any other fund that I have reviewed. I shall repeat the warning that the small cap mutual fund space is fraught with danger and if you do invest, make sure you book profits periodically using technical indicators like moving averages.

Why SBI Small Cap Fund?

If I put myself in the shoes of an investor looking to add a small cap fund for the first time  and look at the list of small cap funds, the following are the funds with an AUM of 1000 Cr and above (AUM on the right-most column and date of inception is in the middle)

Reliance Small Cap FundSep 16, 20107461.29
Franklin India Smaller Companies FundJan 13, 20066982.74
HDFC Small Cap Fund – Regular PlanApr 03, 20086013.22
L&T Emerging Businesses FundMay 12, 20145630.77
DSP Small Cap Fund – Regular PlanJun 14, 20074910.35
Aditya Birla Sun Life Small Cap FundMay 31, 20072231.89
SBI Small Cap FundSep 09, 20091438
Sundaram Small Cap Fund – Regular PlanFeb 15, 20051088.3
Kotak Small Cap Fund – Regular PlanFeb 24, 20051067.41

All the funds at the bottom in bold were small and mid cap funds and have recently become small cap funds due to the SEBI regulations.  Out of these, by sheer instinct I would avoid the Sundaram fund and consider the rest. Just think of this post as looking at SBI small cap in depth. The ABSL fund is compared with SBI small cap below and is also worthy of a closer look.

I think new small cap investors should avoid  large aum small cap funds as they may have trouble performing in this space. They should also keep an eye out for changes in AUM. Also as mentioned above, they should not hesitate to book profit to large caps or to debt


SBI Small Cap Fund: Old vs New Investment Strategy

SBI Mutual Fund announced that from May 15th 2018 onwards its Small and Mid cap fund would become a small cap fund. Earlier it defined small cap as the bottom 100/500 in terms of market cap and could invest between 50 -70% in small caps.  It also had a capacity constraint clause of 750 crores.  As a result, the scheme closed for subscription in October 2015 and re-opened via SIP route only since May 2018. The scheme can now invest 65-100% in small caps defined as bottom 250 stocks in terms of market cap. The benchmark for the fund remains S&P BSE Small Cap Index

The restriction to inflow via SIP is reasonably justified in this space at all times. It would however be better if there is a restriction on the max investment per month per Pan Card as this would also include SIPs.

Fund manager R. Srinivasan has been at the helm since Nov 2013. His first serious challenge was the correction in the small cap space from Jan 2018. The last 1Y trailing return of the fund is -20.7% This is 1% less than the category average but a good 7% more than NIFTY Small cap 250 TRI

SBI Small Cap Fund vs Peers: rolling returns and risk

AMFI only provides NAV data for this fund from Nov 2013 and I could not download earlier NAV from the AMC site. So we will have to restrict the analysis to three year rolling returns and risk. We shall consider two comparison sets below. Note I have not checked the change in investment strategy in these peers. They could have been more of a mid cap fund than a small cap fund in the past. Please excercise due diligence.

Comparison set one

SBI Small Cap vs

  • Nifty Small Cap 250 TRI
  • Franklin Smaller Companies
  • DSP Small Cap (micro cap)
  • L&T Emerging Business
  • HDFC Small cap
  • Reliance small cap

SBI Small Cap Fund vs Peers: rolling returns and risk over 3 years

This covers a period an investment period from Nov 2013 to Jan 2016 and hence returns are plotted three years later. Notice that the SBI Small Cap Fund has done quite well in terms of return but is more volatile than many of its peers.

Comparison set two

SBI Small Cap vs

  • ABSL Small Cap Fund
  • Sundaram Small Cap Fund
  • Kotak Small Cap Fund
  • Nifty Small cap 50 TRI
  • Nifty Midsmallcap 400 TRI

This NSE chart helps in understanding index classification. Also watch my talk on index investing: Can we get higher returns with lower risk?

Again SBI Small Cap fund has done quite well in comparison to peers and benchmarks.SBI Small Cap Fund versus a second set of peers

It is a bit more volatile but investors in this space are not for low volatility!


I reiterate my stance that one does not need a small cap fund. If you so desire please keep the following in mind

  • Choose a fund with low AUM
  • Watch out for AUM surges
  • Use technical indicators like moving averages to periodically move in and move out of small cap funds from say a large cap holding or debt.

SBI Small cap fund in the limited period of observation has performed well and can be considered by a first time investor in a small cap fund. Existing investors in other small cap funds need not shift but must have a solid strategy in place else all the returns obtained will vanish in an instant.

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. Dear Pattu

    Thanks for detailed analysis of this fund.

    Will you also please write a guide on different ways of booking profit using technical indicators or post a link if such guide exists on this or any other website?

  2. Thank you very much for your detail information I am investing in this fund and want to invest for next ten years sir please keep continue I am new invester and also waiting for your advice for another funds like icici pru multicap kotak emerging equity absl tax relief 96 axis long term equity sbi Magnum multicap

  3. Firstly appreciate Good work!! does moving averages exit strategy really work what could be the strategy? generally, people invest mutual funds especially small caps for long term should we follow small-cap index for exit & entries?

    Moreover, I accept aum is Factor before recategorization but after that fund manager has a larger universe of stocks to pick.Even if AUM increases i feel they have good chances in the space to invest

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