HDFC Small Cap Fund: Fund Review
HDFC Small Cap Fund is one of the top funds in the category of small-cap funds. The fund gave an annualized return of 14.51% return since its inception in April 2008. The fund has been performing well in the short-term despite a market correction. It’s the only fund with a positive return in one year time in its category. The fund manager, Chirag Setalvad, is ranked as a top fund manager in the small and mid-cap category by Morningstar. He looks at both absolute and relative valuation parameters to pick up stocks at fair prices. The fund has higher ups and downs and it is recommended to invest in this fund for a horizon of 5 years.
HDFC Small Cap fund is ranked 2nd in its category by Upwardly. With the market undergoing correction with respect to small caps, the fund has been doing exceptionally well in the bear phase. The fund’s performance is way above its category and benchmark where both are giving negative returns in the short run due to market-correction. The fund’s one-year trailing return is positive (0.05%) and while both the category average (-14.08%) and benchmark (26.53%) are giving negative returns.
HDFC Small Cap Fund has beaten its category average by 11-15 percentage points in its benchmark by 1-8 percentage points in the 1, 2, 3 and 5-year returns. The fund has performed better than some of its peers in the 1, 3 and 5-year returns ranking 2nd in the category of small-cap funds. The fund gave 14.51% annualized return since its launch in April 2008.
|Fund||1 Year Return (%)||3 Year Return (%)||5 Year Return (%)|
|HDFC Small Cap Fund||0.05%||16.75%||20.83%|
|Reliance Small Cap Fund||-8.33%||14.07%||30.74%|
|SBI Small Cap Fund||-8.36%||15.44%||29.97%|
|Franklin India Smaller Companies Fund||-12.53%||9.6%||23.84%|
|L&T Emerging Business Fund||-9.35%||18.12%||-|
A SIP investment of Rs 5,000 a month in HDFC Small Cap Fund started 5 years ago is worth Rs 4.62 lakhs now. A profit of Rs 1.62 lakhs in just 5 years. Even if one chose to redeem their investment then they would be liable to pay tax only on Rs 62K as gains up to Rs 1 lakh are exempt from taxes.
HDFC Small Cap Fund is ranked 2nd in the category of small cap funds. The fund has undergone multiple strategy changes from a multi-cap fund to mid and small-cap fund to a small-cap fund. However, the investment philosophy of the fund has seen no significant changes. Chirag Setalvad, the fund manager, is ranked one of the best portfolio managers in the small and mid-cap category by Morningstar. He follows a detailed and exhaustive research and looks at companies who have performed well during the bad market phases. The fund manager prefers quality in stocks which have strong management teams and robust business models. He combines both absolute and relative valuation parameters to pick up stocks at reasonable prices.
The fund manager looks at long-term and his way of investment shows that he rejects the popular opinion. This can be the reason why the fund performance differs from its peers in the short-term.
The fund has 69 stocks in its portfolio. The top five holding sectors constitute 54.36% of the portfolio. These include services (15.84%), chemicals (13.93%), engineering (8.14%), technology (7.69%), and financial (6.87%).
HDFC Small Cap Fund is ideal for medium to long-term goals. Investors whose risk-taking ability is high can look at investing in this fund. The fund accepts both lump sum and SIP investments. This fund has higher ups and downs (volatility) than other equity funds. Invest in this fund for an investment horizon of at least 5 years to give the best results. Do not look at the returns for this fund in short-term. The short-term returns can be manipulative.
|Fund Name||HDFC Small Cap Fund|
|Launch Date||April 3rd, 2008|
|AUM||Rs 4,948 crore|
|Return (Returns greater than 1 year are annualized)||Since Launch: 14.51%
1 Year: 0.05%
3 Year: 16.75%
5 Year: 20.83%
|Fund Category Risk||High|
|Minimum Investment Horizon||5+ years|
|Minimum Investment||Rs 5,000|
|Minimum Additional Investment||Rs 1,000|
|Exit Load||1% if withdrawn within 1 year|
|Fund Manager||Chirag Setalvad
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