Best Small cap and Mid Cap Mutual Funds to invest for SIP in 2017

(Last Updated On: August 9, 2017)

Small cap and Mid cap funds are known for their good stead of returns over a long term period. The real value unlocking happens in the small and mid-cap sector. It involves risk and patience for the fund to grow as against large cap which is known for their less risk and growth strategy. As the economy and companies grow over time, a well-managed small company with strong business model converts itself into a big company. Fund managers in this category look out for the same type of companies across index with growth potential.


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Best Small and Mid Cap Mutual Funds to invest in 2017

  1. HDFC Mid-cap Opportunities Fund
  2. SBI Magnum Mid Cap fund
  3. DSP Blackrock Small and Midcap Fund
  4. L&T India Value Fund
  5. Mirae-  Asset Emerging Bluechip Fund
  6. DSP Blackrock Micro Cap Fund
  7. ICICI Prudential Value Discovery Fund
  8. UTI Midcap fund
  9. Franklin India High Growth Companies Fund
  10. Kotak Emerging Equity Fund


Details Of Top Funds

1.HDFC Mid-cap Opportunities Fund

This fund is blend of both value and growth style of investing. It invests predominantly in equity and equity-related securities of mid cap and small cap companies. The fund generally invests in companies with the growth of 15-20% with healthy cash flow and ROE. This has helped to contain its downside risk in bear phase of markets. The fund invests 75% of its asset in mid caps. Last three years, funds CAGR is at 37.79% and for 5 years is 25.46%.

2. SBI Magnum Mid Cap fund

This fund invests in long-term growth in capital along with the liquidity of an open-ended scheme by investing predominantly in a well-diversified basket of equity stocks of Midcap companies. The fund invests in companies whose market cap is between 100th stock and 400th. The fund avoids stock holding whose promoter holding in the company is less (10 -15%). Ten years return of the stock is 15 % make it a good option to add to the portfolio.

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3. DSP Blackrock Small and Midcap Fund

The blend of both value and growth style, the funds looks out for funds which are not part of the top 100 stocks by market capitalization. The fund invests in companies that have immense growth potential as they are operating on a smaller base. The fund’s exposure in mid-cap is at 71% and small-cap 25%. This helps investors to reap good returns as mid cap and small cap companies grow.

4. L&T India Value Fund

The fund is blend of growth and value investing strategy. Launched in January 2010, the fund has given good returns to investors. Its investment objective is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on undervalued securities. It could also additionally invest in Foreign Securities in international markets. Seven years return is 17.32% which is double the benchmark index of 8.92%.

5. Mirae-  Asset Emerging Bluechip Fund

This fund is top performing fund in its category for the last three years. The funds investing in those companies which are not part of the top 100 stocks by market capitalization and have a market capitalization of at least Rs.100 Crores at the time of investment. The fund’s CAGR is at 42.42% over three years and 29.47% over 5 years which more than 12-14 percentage points of its index. The portfolio allocation of the fund is 55-60% in mid-cap and 20-30% in large caps. There was no severe downside during 2008 financial meltdown. The fund has been top rated for last 3 years.

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6. DSP Blackrock Micro Cap Fund 

A small cap fund which allocates its 75-85% in small cap stock and 15-25% in mid cap stocks. The fund doesn’t invest in stocks that are part of the top 300 companies by market capitalization. It Focuses on the scheme that delivers superior long-term performance by selecting stocks of companies those are uncorrelated to broader markets & not sector specific.  It is the only small-cap fund that has outperformed its benchmark for the last 8 years. It invests in a strategy of buy and hold, giving ample time for the investment to grow.

7. ICICI Prudential Value Discovery Fund

A Multi-cap fund that invests in a well-diversified portfolio of value stocks.  Its strategy is to lookout for stocks with trading at discount and has good growth potential in future. It has a CAGR of 32.7% over 3 years and in terms of returns it is 11-12 % ahead of benchmark in 5 year period. The AUM is Rs 16434 crore and the fund has lowered its holding in mid-cap stocks to 26% due to better valuations in large cap space.

8. UTI Midcap fund

The fund is blend of both value investing and growth. The fund’s objective is to provide ‘Capital appreciation’ by investing primarily imid-cap stocks. The fund avoids Nifty, Sensex, top 50 stocks in terms market cap and less than Rs. 500 crore market cap in the portfolio. Fund’s 3-year CAGR of 39.36% has outperformed the category.

9. Franklin India High Growth Companies

The funds invest in companies offering the best trade-off between growth, risk, and valuation. The fund managers will follow an active investment strategy and will be focusing on rapid growth companies which will be selected based on growth, measures such as Enterprise value, growth rate, price/ earnings/growth, forward price/ sales, and discounted EPS.

With average risk grade, the funds 5 years and 3 years annualized return is 23.89% and 25.49% which is 10 -12 percentage ahead of benchmark.

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10. Kotak Emerging Equity

The fund was launched in March 2007, invests mainly in mid-cap and small-cap stocks. The fund has given a steady rate of return. The fund is blend of both value and growth style of investing. AUM is at Rs 1421 crore as on Feb 28, 2017. Seven-year return of the fund is 17.73% against benchmark index of 10.88%.

The list of funds has been arrived after comparing different funds in the same category. Those funds with long term consistent good returns and had outperformed their benchmark index with gap up of percentage points have been considered.

Charts: ValueResearch


* – This blog post should not be constituted as an advice and investors are requested to do their own due diligence before investing into any of the above-mentioned funds. You can also try out Bodhik to get the funds best suited to your profile

** – All the numbers are as of writing of this post i.e 29th March 2017.



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