Nippon India Small Cap Fund | Mutual Fund | SIP | ETF | Investment
Looking to tap into the high-growth potential of emerging companies? The Nippon India Small Cap Fund is one of the most popular and top-performing mutual funds in India’s small-cap equity space. Designed for long-term wealth creation, this fund gives investors exposure to high-potential small-cap stocks that are often overlooked by the broader market.
In this article, we’ll explore what makes this fund unique—its investment strategy, risk profile, sector exposure, historical performance, and how both lump sum and SIP investors would have benefited over the past five years.
What Is the Nippon India Small Cap Fund?
The Nippon India Small Cap Fund is an open-ended equity mutual fund, launched on 16 September 2010, with a primary objective of long‑term capital appreciation by investing mainly in small‑cap companies—as mandated by SEBI (i.e. firms ranked 251 and beyond by market capitalization). It’s managed by Nippon Life India Asset Management, with Samir Rachh since 2017.
Fund Type, Exposure & Portfolio Allocation (Nippon India Small Cap)
- Fund Category: Small‑Cap Equity (mandated ≥65 % allocation to small‑cap firms)
- Equity Exposure: ~96%, with ~70% small cap, ~13% mid cap, ~12% large cap and ~4% cash
- Sector Diversification: Major sectors include industrials (~27%), financial services (≈13.7%), consumer cyclical (~13.4%), basic materials, tech and healthcare.
- Top Holdings: Multi Commodity Exchange (~2.5%), HDFC Bank (~2.0%), Kirloskar Brothers (~1.6%), Karur Vysya Bank (~1.3%) and others.
- The fund contains 200+ holdings, which is significantly more diversified than typical small‑cap funds with 60–90 stocks—this is a deliberate strategy to reduce risk while deploying a large AUM efficiently.
Risk Profile & Investment Philosophy
- Risk Level: Ranked ‘Very High’ by Valueresearch, Medium by Morningstar
- Volatility: Standard deviation around 16.6%–17.4%, slightly above category average but below benchmark volatility
- Sharpe/Sortino Ratios: Strong risk‑adjusted performance
- Alpha: Positive—fund consistently generates excess return over benchmark, with alpha in the 2–5% range
Strategy
Focuses on identifying quality high‑growth companies available at reasonable valuations, with wide diversification to ride multiple winners and manage liquidity across a large asset base
Historical Returns (Direct Growth Plan)
| Period | Annualized Return (%) |
| 1 Year | ≈ –1.7% |
| 3 Years | ≈ 28.6% |
| 5 Years | ≈ 37.3%–37.9% |
📈 Example
Lump Sum Returns (CAGR ~37.25%)
Assuming ₹100,000 invested 5 years ago at annualized 37.25%:
- Future value ≈ ₹100,000 × (1 + 0.3725)^5 ≈ ₹553,000
- Absolute return ~ 453% over 5 years
SIP of ₹1,000/month
Using compounded growth model at 37.25% annual return:
- Total invested = ₹60,000
- Estimated corpus = ₹1,69,449
✅ Important Points
- Exposure: ~70% to small caps, rest in mid/large caps and cash for liquidity and stability
- High risk, high return: Ideal for long‑term investors (7+ years), given significant volatility and growth potential
- Strong performance metrics: 5‑year CAGR ~37%
- Diversified strategy: 200+ stocks to reduce concentration risk while handling large AUM
- Restrictions: Lumpsum investments often restricted to manage deployment effectively—only SIP allowed for many investors currently
You may read “1 Crore with an SIP of ₹5,000 per Month SIP“
⚠️ Risks & Investor Suitability
- Volatility: Small‑cap equities can swing significantly; investor must be comfortable with large fluctuations.
- AUM concerns: Massive AUM could limit future return potential as deploying new capital in small caps becomes harder
- Investment horizon: Recommended horizon is 7–15 years at least to ride multiple market cycles
Conclusion
For investors with high risk appetite and long-term horizon, the Nippon India Small Cap Fund offers an attractive combination of exceptional historical returns, disciplined risk‑management, and deep diversification. However, investors must keep in mind that this fund is high volatile. It is advisable to adjust its high volatility with other funds like etc.
FAQ
Q. What type of fund is Nippon India Small Cap Fund?
It is an open-ended equity mutual fund that primarily invests in small-cap companies to generate long-term capital appreciation.
Q. Is Nippon India Small Cap Fund high risk?
Yes, it carries a very high risk due to its exposure to small-cap stocks, which are more volatile but can offer higher growth potential over the long term.
Q. Can I invest a lump sum in this fund?
As of now, lump sum investments are restricted in many cases due to the fund’s large size. SIPs (Systematic Investment Plans) are generally allowed and encouraged.
Q. What is the minimum SIP amount for this fund?
The minimum SIP investment is typically ₹100 per month, making it accessible for retail investors.
Q. What kind of returns has the fund delivered?
Over the last 5 years, the fund has delivered an impressive annualized return of around 37%, though past performance doesn’t guarantee future results.
Disclaimer:
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Readers are encouraged to do their own research and consult a qualified financial advisor before making any investment decisions.