NFO Pick – (Samco Small Cap Fund)

28 Sep 2025 , 02:10 PM

THE CASE FOR SMALL CAP FUNDS

Small cap funds invest predominantly in small cap stocks, which are ranked beyond 250 in terms of market cap rankings. Small caps have some basic advantages. Firstly, they can give phenomenal returns when they graduate to mid-caps and later to large caps. Secondly, small caps tend to be low on debt, and that keeps financial risk low. Lastly, small caps tend to be focused on one business line, which gives them the core competency edge.

However, small caps have some shortcomings too. Their business models tend to be too dependent on a few customers. Also, their businesses are not as matured as the large caps and hence small caps tend to be riskier bets. Above all, the strike rate of success in small caps is quite low, so a very careful bottom-up approach is called for.

IMPROVING SUCCESS IN SMALL CAPS – MOMENTUM APPROACH

SAMCO AMC will be using its existing proprietary analytical framework to identify small caps with different perspectives of momentum at work.

• The first measure is momentum as measured by outperformance of peer group
• The second measure is absolute momentum; in isolation and against the index.
• The third measure is positive sales momentum, showing favourable business growth.
• The model will also look at earnings momentum in terms of quality of PBT.

Let us turn to how small-cap funds have performed over different time frames!

HOW SMALL CAP FUNDS PERFORMED IN INDIA

Small Cap Funds in India manage ₹3,63,764 Crore AUM across 31 funds; with 21 funds having 5-year track record. Here are the top-10 small cap funds based on 5-year CAGR returns (Direct Plans).

Scheme Name	1-Year (%) Returns	3-Year (%) Returns	5-Year (%) Returns	Daily AUM (₹ in Crore)
Quant Small Cap Fund	-8.99	24.63	36.15	29,957.51
Nippon India Small Cap Fund	-6.70	23.78	33.78	67,350.08
Bandhan Small Cap Fund	-2.58	30.80	33.08	15,893.62
Tata Small Cap Fund	-6.60	22.61	32.24	11,836.46
Invesco India Smallcap Fund	-1.66	26.35	32.06	8,127.17
HDFC Small Cap Fund	0.68	24.53	31.96	37,535.98
HSBC Small Cap Fund	-8.83	20.79	31.69	16,477.70
Edelweiss Small Cap Fund	-4.53	21.75	31.31	5,118.36
Bank of India Small Cap Fund	-6.43	21.57	30.55	1,967.68
Franklin India Small Cap Fund	-8.90	22.64	30.35	13,592.87

Data Source: AMFI

Small-Cap Funds generated average 1-year return of -5.30%, 3-year CAGR returns of 21.64%, and 5-year CAGR returns of 30.15%. The 5-year return may look inflated due to the COVID base. Return dispersion is low over longer time durations, but these funds have clearly outperformed Nifty over longer time frames.

GLANCE AT SAMCO SMALL CAP FUND

Here are key details of the Samco Small Cap Fund.

• NFO opens on November 14, 2025 and closes on November 28, 2025. This open-ended Fund will invest in a portfolio of small cap equities, ranked beyond 250 on market cap.
• On the risk-o-meter, Invesco India Consumption Fund is classified as “High Risk,” due to its substantial exposure to equity and the underlying focused risk of small caps.
• Samco Small Cap Fund is best suited to investors looking at long term wealth, via a slightly higher risk strategy of investing in small caps with a potential to upgrade.
• The benchmark for the fund will be the Nifty Small Cap 250 TRI. Umesh Mehta, Nirali Bhansali, Dhawal Dhanani will be the designated fund managers.
• Minimum application amount in NFO is ₹5,000 and in multiples of ₹1 thereof. Minimum SIP outlay will be ₹500 for a monthly SIP.
• There is no exit load for redemption up to 10% of holdings. Holdings beyond 10% will attract an exit load of 1%, if the investor exits before 1 year from date of allotment.

Samco Small Cap Fund will be classified as an equity fund for tax purposes. Short term capital gains (STCG) will be taxed at 20.8% (including cess). Long term capital gains (LTCG) will be taxed at 15%, after a base tax-free LTCG limit of ₹1.25 Lakhs per fiscal year.