https://www.advisorkhoj.

com/articles/Mid-&-Small-Cap-Funds/Top-10-Small-and-Midcap-Funds-to-investin-2015
Top 10 Small and Midcap Funds to invest in 2015

A few days back we had reviewed the top large cap funds based on CRISILs most recent ranking.
In this blog, we will review the top small and midcap funds While, in the last one year the large cap
equity mutual funds gave on average over 61% trailing annualized returns, the returns of small
and midcap equity funds were even higher over the last one year. The chart below shows the
comparison of average annualized returns of large cap funds versus small and midcap fund
categories over 1 year, 3 years and 5 years investment horizon.

In fact, on a trailing annualized basis small and midcap funds gave the highest returns among all
mutual fund categories over the last 3 year period. While small and midcap funds have the
potential to give higher returns than large cap funds, the intrinsic risk of small and midcap funds is
higher than large cap funds. However, small and midcap funds appropriately weighted in the
investment portfolio based on the investors risk tolerance level, can significantly enhance the
overall portfolio total returns.
In this blog, we will review top 10 small and midcap equity funds based on CRISILs mutual fund
rankings for the last quarter. CRISIL ranks equity funds based on several parameters like average
3 year annualized returns, volatility, portfolio concentration risk (both industry and company) and
portfolio liquidity risk. In addition to selecting funds based on their relative ranking within the small
and midcap categories, we have also selected consistent performers among small and midcap
funds. Each of the small and midcap equity funds in our selection has been assigned either Rank
1 or 2 by CRISIL. Further, in addition to CRISIL ranking, we have applied MORNINGSTAR rating
as a secondary filter for our fund selection. The table below lists the top 10 small and midcap
funds, in order of the highest 1 year annualized returns. Returns in the table are for growth options
in regular plans, based on NAVs on Feb 25, 2014.

Let us now look at SIP returns of each of these funds over the last 5 years, assuming a monthly
SIP of Rs. 5,000 made in the growth option of these schemes on the first working day of every
month. Please note that since the Reliance Small Cap Fund has not yet completed 5 years, the
SIP return of this fund is since inception (NAVs as on February 25, 2015).

For each of these schemes, the investment value as on February 25 2015 is more than double of
what the total investment made by the investor. Further, for each of these schemes the SIP return
is more than the lump sum return. This is a testimony of the power of SIPs in wealth creation. SIPs
turn volatility into a virtue and therefore are ideal investment options for long term investors.
Conclusion
In this article, we have reviewed the top picks among small and mid cap equity funds based on the
most recent CRISIL rankings and Morningstar ratings. While all these funds have demonstrated a
strong track record of performance, the suitability of each of these funds would depend on your
risk profile and time horizon. You should consult with your financial adviser if these small and
midcap funds are suitable for your portfolio.
Author Details

Dwaipayan Bose
An alumnus of IIM Ahmedabad, Dwaipayan is a Finance and Consulting professional, with 13
years of management experience, mostly in MNCs like American Express and Ameriprise
Financial, both in India and the US. In his last role, he was the Chief Financial Officer of
American Express Global Business Services in India. His key interests are building best in

class organizations, corporate governance and talent development