Fund of Fortnight

Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.[EasyDNNnews:PaidContentStart]

Reason for recommendation
Small-Cap funds are often considered by investors who are willing to take higher risk in search of higher long-term wealth creation. While the category can be volatile in the short term, a longer investment horizon can help investors participate in the compounding potential of emerging businesses. Within this space, SBI Small Cap Fund stands out due to its strong rolling return profile, diversified portfolio positioning and relatively controlled volatility compared with peers. On a three-year rolling return basis, the fund delivered an average CAGR of 24.63 per cent and a median CAGR of 25.00 per cent, indicating that its performance was broad-based rather than dependent on a few exceptional periods. Importantly, the fund recorded no negative return outcomes, with 79.38 per cent of observations generating returns above 15 per cent and 62.72 per cent delivering returns above 20 per cent.

The five-year rolling return data reflects even greater stability. The fund posted an average CAGR of 23.67 per cent and a median CAGR of 23.55 per cent. The probability of weaker outcomes, defined as returns below 8 per cent, stood at only 0.54 per cent. The fund’s sector allocation is well spread across growth-oriented areas. Financials hold the highest weight at 16.55 per cent, followed by Automobiles at 11.52 per cent, Capital Goods at 10.61 per cent, Consumer Staples at 9.74 per cent, and Chemicals at 9.20 per cent. This gives the portfolio exposure to credit growth, manufacturing, consumption and industrial expansion. From a risk perspective, SBI Small Cap Fund appears relatively less volatile compared with its peers. Its standard deviation of 17.18 and beta of 0.75 are the lowest among the listed small-cap funds, suggesting a more controlled risk profile within a high-growth category. The fund’s top holdings include Ather Energy, Navin Fluorine, City Union Bank, ZF Commercial Vehicle Control Systems India and Kalpataru Projects. Overall, SBI Small Cap Fund may appeal to long-term investors seeking small-cap exposure with relatively lower volatility, strong historical return consistency and participation in India’s broader growth story.

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