scorecardresearchAxis Small Cap Fund has earned over 19% returns in five years. Should you

Axis Small Cap Fund has earned over 19% returns in five years. Should you invest?

Updated: 14 Jun 2022, 10:13 AM IST
TL;DR.

Axis Small Cap Fund is a great choice of fund for those looking to benefit from the volatility in small-cap securities. 

Volatility and great returns are synonymous with small cap mutual funds. You must take into stride the inherent volatility and be willing to stay invested for a long period to earn enviable returns from these funds. 

Volatility and great returns are synonymous with small cap mutual funds. You must take into stride the inherent volatility and be willing to stay invested for a long period to earn enviable returns from these funds. 

Small-cap stocks have taken a huge beating in the market as rising prices shrunk demand for their products while subsequent interest rate hikes increased the debt burden simultaneously. 

However, all is not over yet as the market is yet to touch its final bottom from where one can expect a bull run in the future. Despite the weakness, analysts expect some stocks to perform owing to their products’ presence in both commercial and regular use.

Take, for example, the Axis Small Cap Fund which has managed to yield 19.39 per cent returns over the past five years and 24.10 per cent returns since its inception. 

The cumulative returns over the past five years amount to 142.79 per cent. The absolute returns since the fund was launched in the market in November 2013 is 531.50 per cent.

An overview of this fund reveals that 79.48 per cent of its money is put into domestic equities of which 0.38 per cent is in large-cap stocks, 4.3 per cent in mid-cap stocks and 58.60 per cent is held in small-cap stocks.

However, short-term investors looking for quick returns must avoid putting their money in this fund as high returns are possible only after staying invested for three to four years. Owing to the volatility of the stocks, investors must also be ready to face losses in the short to medium run.

Fund performance

Many investors inquire why they must invest in this fund more than any other. A comparative analysis of most income funds in this category underscores the exceptionally high returns that investors have earned by investing in it. Apart, the fund charges an expense ratio of 0.46 per cent, which is far reasonable compared to most other small-cap funds being offered by asset management companies in the market.

Name of the fund Three-year returnsFive-year returnsExpense ratio
Nippon India Small Cap Fund26.47%17.05%1.02%
Kotak Small Cap Fund29.72%16.90%0.49%
Union Small Cap Fund26.48%13.85%1.51%
L&T Emerging Businesses Fund21.79%13.20%0.79%

Staying invested for a prolonged period yields returns exceeding most other equity mutual funds. This you can achieve by investing in this fund through systematic investment plans over a period ranging from 10 to 15 years.

Axis Small Cap Fund

Launched on November 29, 2013, the current assets under management (AUM) amount toRs 8984.18 crores. The risk factor is high considering how this fund spreads itself thin among multiple investment options, especially, in the small-cap sector.

The fund is benchmarked against the NIFTY Smallcap 250 Total Return Index and can be bought to earn long-term returns. Considering the low expense ratio charged by this fund, the returns from this long-duration fund are quite high compared to most other small-cap funds in this category.

The minimum amount you can invest in this fund is 5000 in a lump sum while you can make an added minimum investment of 100 in a lump sum in this fund. The minimum investment you can make through SIPs is 500.

This fund attracts an exit load of one per cent for investments redeemed beyond 10 per cent within a year.

As per the guidelines stipulated by the Securities and Exchange Board of India (SEBI), investments in this fund come under the “Very High Risk” category. Keeping in mind, how the asset management company has been keen to serve its clients as per the global best practices, this fund has been awarded the “Five Stars” CRISIL Mutual Fund Ranking.

Tax treatment

If the fund’s units are redeemed within three years of investment, the profits will be added to the investor’s income, which will be then taxed as per the rates mentioned in the Income Tax slab.

For investors who redeem the fund units after three years of staying invested, gains will be taxed at 20 per cent post indexation benefits.

Investors also earn dividends regularly from this fund. The dividend income from this fund will be added to the income of the investor who would then be taxed as per the respective tax slabs.

The fund house will deduct a TDS of 10 per cent on dividend income exceeding 5000 in any financial year.

Disclaimer:Mutual funds are subject to market risks. Please read the offer document carefully before investing. Also, the Securities and Exchange Board of India has stipulated the latest guidelines categorising this fund under the “Moderate Risk” category.

Article
Rebalancing is the process through which you can change the weightage of assets in your portfolio. 
First Published: 14 Jun 2022, 10:13 AM IST