HDFC Small Cap Fund Review – Should You Invest?

HDFC Small Cap Fund Review – Should You Invest?

HDFC Small Cap Fund is a Small Cap Fund which was Started in April’ 2008.

Fund Information

AMC – HDFC Mutual Fund is the Fund House of HDFC Small Cap Fund.HDFC Mutual Fund is the largest AMC in India with an AUM of 3.70 Lakh Crore as on 30th Sept’19 and HDFC Mutual fund was launched in 1999.

Scheme Launch Date – 3rd April’ 2008

Investment Objective – To provide long-term capital appreciation by investing predominantly in Small-cap companies. There is no assurance that the objective of the scheme will be realised.

Benchmark – Nifty Smallcap 100 TRI

AUM – Rs.9033.69 Crore (As on 30th Nov’19)

Fund Managers – Mr Chirag Setalvad (Since June’14) & Mr Chirag Dagli (Since July’19)

Exit Load – 1% if Investment is Redeemed Before 365 Days of Investment

Expense Ratio

  • For Regular Plans – 1.94%
  • For Direct Plans – 0.88%

Minimum SIP Amount – Rs.500 p.m.

Minimum Investment – Rs.5000

Minimum Additional Investment – Rs.1000

Scheme Performance

Trailing Returns (%) as on 24th Dec’19

ParticularsYTD1 Month3 Months1 Year3 Years5 Years
Fund-9.60-0.01-4.73-9.0611.7110.25
S&P BSE Small-Cap TRI-8.05 0.22-1.21-.7.55 5.18 5.12
Category-2.11-0.12-0.66-1.87 8.18 8.70

Source – Value Research

Value of Rs.10,000 SIP Started in HDFC Small Cap Fund

Time PeriodInvestment (Rs.)Investment Value (Rs.)Absolute Returns (%)Annualised Returns (%)
1 Year1,20,0001,11,893-6.76-12.25
2 Years2,40,0002,14,944-10.44-10.22
3 Years3,60,0003,44,943-4.18-2.75
5 Years6,00,0006,88,96314.825.47
10 Years12,00,00021,89,69183.2211.64

Source – Moneycontrol

Investment Portfolio

Asset Allocation

HDFC Small Cap Fund - Asset Allocation

Top 10 Stock Holdings (As on 30th Nov’19)

Sr No.Company Name% of Total Assets
1NIIT Techonologies Ltd3.19
2Sonata Software Ltd3.05
3DCB Bank Ltd.2.81
4INOX Leisure Ltd2.62
5Indiana Hotels Co. Ltd.2.52
6Balkrishna Industries Ltd.2.46
7Chalet Hotels Ltd.2.43
8Federal Bank Ltd.2.38
9Finolex Industries Ltd.2.31
10Chambal Fertilizers & Chemicals2.26
Total26.03

Sector Allocation

Sr No.Sectors% of Total Assets
1Miscellaneous8.08
2IT – Software7.79
3Hotel & Restaurants6.37
4Engineering & Construction5.73
5Pharmaceuticals & Drugs5.37
Total33.34

Risk Measurement Parameters

ParticularsStandard DeviationSharpe RatioBetaAlpha
Fund16.520.360.796.91
S&P BSE Small-Cap TRI19.650.01
Category17.180.070.802.47

Source – Value Research

Also Read – What is Standard Deviation, Sharpe Ratio, Beta and Alpha in Mutual Funds?

Risk Analysis

Standard Deviation – The Standard Deviation of the fund is lower than its benchmark and category average. As per SD, the fund can underperform its benchmark and category in terms of extra returns generated from its past performance.

Sharpe Ratio – The fund has higher Sharpe Ration then its benchmark and category. This means the fund has better risk-adjusted returns as compared to its benchmark and category.

Beta – The Beta of the fund is 0.79 which means the fund is less volatile than the market. The Beta of Category Average is similar to the fund which means the fund has similar volatility as the category.

Alpha – Alpha of the fund is 6.91 which means the fund has the potential of outperforming its benchmark by 6.91%. The Alpha of fund is also better than the category average which means the fund has better chances of outperforming the benchmark.

Should You Invest in HDFC Small Cap Fund?

Looking at the returns, the fund has outperformed its benchmark Small Cap Index & Category Average for time horizons of 3 Years & 5 Years. Top 10 Holdings make around 26% of AUM which is very good and shows funds less dependence on its Top 10 Stocks. Top 5 Sectors Holdings make around 33% and Top 3 Sectors make around 22% which is quite good and shows fund has very good sector diversification.

Risk Analysis shows us the fund is Low risk and average Return fund. Alpha shows us that the fund also has the capacity to outperform benchmark and category with better lower risk-adjusted returns.

Investors with Long Term view of At least 7 Years or more should definitely invest in this fund. The fund can be volatile in the short term but the long term returns are always excellent. Investing with SIP in this fund is an excellent way to invest avoid lumpsum investing when markets are at record highs.

Also, Investors who are already invested in this fund would have seen negative returns in the short term, but they should not be worried about short term volatility and have a long term view. The fund is among Top 3 Small-Cap Funds in India and Investors Should Invest with a long term view.

Smart Tip – Whenever you are investing in Mutual Funds, Always Invest through Direct Plans and Avoid Regular Plans. You can check out the difference between Direct vs Regular Plans and How to Switch from Regular to Direct Plans.

Also Read – Nippon India Small Cap Fund Review & SBI Small Cap Fund Review

Hope you liked HDFC Small Cap Fund Review and If you have any question do let us know in the Comments Section Below & Thank You very much for reading.

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