7 Equity Mutual Funds Offered Over 50% Returns in Nine Months – Have You Checked?
The stock market has witnessed a remarkable rally over the past nine months, with several equity mutual funds delivering stellar returns. In particular, seven equity funds have generated over 50% returns in just nine months, making them attractive options for investors looking for high growth. One standout performer in this space is the Nippon India Small Cap Fund, which has emerged as one of the top-performing funds during this period.
In this article, we will explore these seven high-return equity mutual funds, including their key features, risk factors, and what has driven their extraordinary performance. We will also dive into the specifics of small-cap funds like Nippon India Small Cap Fund and how they contribute to aggressive growth in a well-diversified portfolio.
What Are Equity Mutual Funds?
Equity funds primarily invest in shares of companies across various sectors and market capitalisations. These funds aim to generate long-term capital appreciation by participating in the stock market's growth. The performance of these funds is directly linked to the ups and downs of the equity markets, making them riskier than debt funds but with the potential for higher returns.
Equity mutual funds are categorised into different segments based on their investment style, such as large-cap, mid-cap, small-cap, or multi-cap funds. Some funds also follow specific themes or sectors to maximise growth in particular industries.
7 Equity Mutual Funds That Delivered Over 50% Returns in Nine Months
Here’s a look at seven equity mutual funds that have outperformed over the past nine months, delivering over 50% returns:
1. Nippon India Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 55%
Key Features: This fund invests primarily in small-cap stocks, which are companies with smaller market capitalisations but with significant growth potential. The fund has benefitted from the strong performance of small-cap stocks during the recent market rally.
Why It Performed: The small-cap segment has witnessed a robust recovery, and the fund’s focus on companies with high growth potential has paid off.
2. Quant Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 58%
Key Features: Similar to Nippon India Small Cap Fund, this fund focuses on small-cap companies. Its strategy is to invest in high-growth small-cap firms that have a strong track record of performance and future potential.
Why It Performed: Small-cap funds have gained from the market's rally, and Quant Small Cap Fund capitalised on the opportunities in emerging industries.
3. Axis Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 50%
Key Features: Axis Small Cap Fund follows a strategy of identifying companies with robust fundamentals and strong growth potential in the small-cap space.
Why It Performed: The fund's portfolio is well-diversified within the small-cap segment, and the strong performance of small-cap stocks has boosted returns.
4. SBI Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 52%
Key Features: This fund focuses on investing in small-cap companies that are poised for growth. It benefits from SBI’s strong research team, which identifies promising small-cap stocks.
Why It Performed: SBI Small Cap Fund has been able to capture the growth momentum in several small-cap stocks, contributing to its exceptional returns.
5. Kotak Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 51%
Key Features: Kotak Small Cap Fund targets small-cap companies with growth potential. It focuses on companies with strong management teams and solid financials.
Why It Performed: The fund’s selection of stocks in growth sectors such as technology and manufacturing has contributed to its success.
6. HDFC Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 53%
Key Features: HDFC Small Cap Fund invests in companies with smaller market capitalisations, focusing on undervalued stocks with the potential for high growth.
Why It Performed: The fund’s strategy of investing in high-growth, undervalued small-cap companies has helped it outperform the broader market.
7. ICICI Prudential Small Cap Fund
Category: Small-Cap Fund
9-Month Return: Over 54%
Key Features: ICICI Prudential Small Cap Fund targets small-cap companies with high growth potential, particularly in sectors such as technology and pharmaceuticals.
Why It Performed: The fund's exposure to high-performing sectors such as technology has driven its impressive returns.
Why Small-Cap Funds Have Outperformed
Small-cap funds, like the Nippon India Small Cap Fund, have delivered extraordinary returns in the past nine months. Here’s why small-cap funds have been the top performers:
Growth Potential: Small-cap companies often have more room to grow compared to large-cap companies. These companies are typically in their early growth stages, and as they expand, their stock prices rise, offering high returns to investors.
Market Recovery: Small-cap stocks tend to perform well during market recoveries. After the COVID-19 pandemic, many small-cap companies rebounded strongly, and this rally has contributed to the excellent performance of small-cap mutual funds.
Sectoral Performance: Small-cap funds often invest in emerging sectors such as technology, pharmaceuticals, and renewable energy, which have experienced significant growth over the past year.
Should You Invest in Small-Cap Funds Now?
While small-cap funds have provided excellent returns, it’s important to remember that they come with higher risks. Small-cap companies are more volatile and can experience sharp price fluctuations. Therefore, these funds are more suitable for investors with a high-risk tolerance and a long-term investment horizon.
If you are looking to add aggressive growth to your portfolio and are willing to accept the volatility that comes with small-cap stocks, funds like Nippon India Small Cap Fund can be a good option. However, it is advisable to diversify your portfolio across large-cap, mid-cap, and small-cap funds to balance risk and reward.
Key Considerations Before Investing in Small-Cap Funds
Risk Tolerance: Small-cap funds are high-risk investments due to the volatility of small-cap stocks. Ensure that your risk tolerance matches the fund’s risk profile.
Long-Term Horizon: Small-cap funds are best suited for long-term investors who can weather market volatility and give their investments time to grow.
Diversification: To mitigate risks, it's crucial to diversify your investments across different types of mutual funds, including large-cap, mid-cap, and small-cap funds.
Conclusion
The last nine months have been remarkable for equity mutual funds, particularly small-cap funds, which have delivered over 50% returns. The Nippon India Small Cap Fund is one of the top performers in this category, thanks to the strong performance of small-cap stocks in various sectors.
However, it’s essential to approach small-cap funds with caution due to their high-risk nature. They are best suited for investors with a long-term horizon and a higher tolerance for risk. If you’re considering investing in small-cap funds, evaluate your financial goals and risk profile to ensure that these funds align with your investment strategy.
By balancing small-cap funds with more stable options like large-cap or multi-cap funds, you can create a well-diversified portfolio that captures the growth potential of small-cap stocks while managing risk effectively.
Disclaimer: This article is published in association with Teamology and not created by TNM Editorial.