SBI Small Cap vs Quant Small Cap vs Nippon Small Cap | Which is the best small-cap fund?

Summary

In this video, we compare three popular small-cap funds in India: Quant Small Cap, SBI Small Cap, and Nippon India Small Cap. The focus is on their returns, risk profiles, investment styles, and asset allocations. While Quant Small Cap delivers the highest returns, it also comes with higher volatility. SBI Small Cap offers better downside protection but with lower returns. Nippon India Small Cap strikes a balance between the two. The video helps viewers choose the right fund based on their investment preferences, risk tolerance, and market conditions.

Takeaways

• 😀 Quant Small Cap Fund has delivered the highest rolling returns in the past 2-4 years, followed by Nippon India Small Cap, with SBI Small Cap having the lowest returns.
• 😀 While returns are crucial, it's important to consider risk as well. Funds with less volatility can recover losses more easily after a market downturn.
• 😀 SBI Small Cap Fund has shown better downside protection during market corrections compared to the other two funds.
• 😀 Quant Small Cap Fund is the most volatile among the three, but it has the best recent performance overall.
• 😀 The PE ratio of a fund indicates its investment style: SBI Small Cap follows a growth style, while Quant Small Cap leans towards value investing, and Nippon is a blend of both.
• 😀 A higher turnover ratio in a fund suggests more frequent buying and selling of stocks, while a lower turnover ratio suggests a buy-and-hold strategy.
• 😀 Quant Small Cap Fund has the highest turnover ratio, indicating a more active trading style compared to the other two funds.
• 😀 SBI Small Cap Fund maintains a significant allocation to midcaps (8%) and has the least amount of large-cap stock exposure.
• 😀 Nippon India Small Cap Fund has the largest number of stocks (206), reflecting its size and the need for diversification in its portfolio.
• 😀 While Quant and Nippon focus on diversified portfolios, SBI Small Cap has a more concentrated portfolio, with just 55 stocks as of 2023.
• 😀 Understanding risk, returns, and investment style helps investors make a more informed decision about which small-cap fund is right for them.

Q & A

Which small cap fund performed the best in terms of rolling returns for the 2-year and 4-year periods?

Quant Small Cap Fund had the best rolling returns, followed by Nippon India Small Cap Fund and then SBI Small Cap Fund.

How did the three small cap funds perform during market corrections?

Quant Small Cap Fund experienced more volatility during market corrections, falling more than the category four out of six times. In contrast, Nippon India Small Cap Fund fell less, and SBI Small Cap Fund performed better than the category five out of six times.

What is the significance of the PE ratio when evaluating small cap funds?

The PE ratio helps identify the investment style of a fund. A higher PE ratio indicates a growth style (as seen with SBI Small Cap Fund), while a lower PE ratio suggests a value investing approach (as seen with Quant Small Cap Fund).

Which fund has the highest turnover ratio, and what does this signify?

Quant Small Cap Fund has a higher turnover ratio, suggesting that the fund manager is more active in buying and selling stocks compared to the other two funds.

How does the allocation to midcap and large-cap stocks affect small cap funds?

Funds that invest in midcap and large-cap stocks can cushion the downside risk during market corrections. For instance, SBI Small Cap Fund has an 8% allocation to midcaps, and Quant Small Cap Fund has 18% allocated to large-cap stocks.

How does the number of stocks in a fund’s portfolio impact its performance?

A higher number of stocks in a portfolio (as seen with Nippon India Small Cap Fund with 206 stocks) can help mitigate liquidity risks but may dilute returns. Conversely, a smaller number of stocks (like SBI Small Cap Fund with 55 stocks) can lead to a more concentrated and potentially higher-risk strategy.

What investment style does SBI Small Cap Fund follow, and how does it compare to the other funds?

SBI Small Cap Fund follows a growth style of investing, as evidenced by its high PE ratio and concentration in small-cap stocks. It may not have the best returns but offers better downside protection compared to the other two funds.

Which fund is the most volatile, and why?

Quant Small Cap Fund is the most volatile, as it has the highest returns but also experiences more significant fluctuations compared to the other funds. It is the riskiest among the three.

What is the downside protection strategy of SBI Small Cap Fund?

SBI Small Cap Fund offers downside protection by maintaining a higher allocation to debt and midcaps. This approach cushions the fall during market corrections, as observed in recent small cap stock declines.

How does Nippon India Small Cap Fund differ in terms of stock allocation compared to the other two funds?

Nippon India Small Cap Fund maintains a balanced approach with 68% of its portfolio in small-cap stocks, 17% in midcaps, and 11% in large caps, offering a diversified strategy. This is in contrast to Quant and SBI Small Cap Funds, which have different proportions of mid and large-cap stocks.