5 Small Cap Funds Down by Over 10% in the Recent Market Correction

Concerns over expensive valuations, weaker than expected earnings growth in some cases, and fears of a slowing domestic economy have dampened investor sentiment, resulting in a steep decline in stock prices across the board.

Amid this market correction, most Small Cap Funds exhibited resilience, plunging less than their respective benchmark indices. However, a few mutual funds failed to limit the downside risk and trailed their peers and the benchmark.

While short-term performance is not a reliable indicator for the fund's future potential, it makes sense to review the portfolio during extreme market conditions. Only those schemes that do well across most market phases can be expected to generate meaningful alpha over the long run.

[Read: Small Cap Index Has Corrected. Good Time to Invest in Small Cap Funds Now?]

Here are the 5 Small Cap Funds that are down by over 10% in the recent market correction:

#1 Mahindra Manulife Small Cap Fund

Mahindra Manulife Small Cap Fund is a relatively new scheme in the Small Cap Fund category having been launched in December 2022. It currently has an AUM of Rs 3,866 crore.

The fund aims to identify growth-oriented, fundamentally sound small-cap stocks which forms around 70% of its assets, with the balance in mid caps, large caps, and cash.

Its top holdings include Reliance Industries, Anant Raj, Aditya Birla Real Estate, Piramal Pharma, and CESC.

Since October 2024 Mahindra Manulife Small Cap Fund's NAV has witnessed a decline of 13.6% higher than the decline of 11.5% in its benchmark BSE 250 Small Cap - TRI index.

For more information check out Mahindra Manulife Small Cap Fund's factsheet.

#2 Aditya Birla SL Small Cap Fund

Aditya Birla SL Small Cap Fund was originally launched as a Small & Midcap Fund in May 2007 but was recategorised in 2018. It currently has an AUM of Rs 5,100 crore.

The fund utilises a bottom-up approach to pick stocks across sectors, focusing on the company's fundamentals, management quality & strength of their businesses, and valuations. It invests around 80-85% of its assets in small caps and the balance in mid caps.

Its top holdings include Hitachi Energy India, Kirloskar Pneumatic Company, TD Power Systems, Navin Flourine International, and Brigade Enterprises.

Since October 2024 Aditya Birla SL Small Cap Fund's NAV has witnessed a decline of 12.3% higher than the decline of 11.5% in its benchmark BSE 250 Small Cap - TRI index.

For more information check out Aditya Birla SL Small Cap Fund's factsheet.

#3 Baroda BNP Paribas Small Cap Fund

Launched in October 2023, Baroda BNP Paribas Small Cap Fund is one of the youngest schemes in the Small Cap Fund category having an AUM of Rs 1,438 crore.

The fund aims to tap companies that have the potential to become leaders of tomorrow, focusing on selecting companies with strong fundamentals, quality business models, and reputation of the management team. It invests around 70-80% of its assets in small caps, along with 10-20%

Its top holdings include KFin Technologies, GE Vernova T&D India, Hitachi Energy India, Mahanagar Gas, and Jyoti CNC Automation.

Since October 2024 Baroda BNP Paribas Small Cap Fund's NAV has witnessed a decline of 12.1% higher than the decline of 10.5% in its benchmark Nifty Small Cap 250 - TRI index.

For more information check out Baroda BNP Paribas Small Cap Fund's factsheet.

#4 Tata Small Cap Fund

Launched in November 2018, Tata Small Cap Fund aims to invest in stocks of companies that are in growth mode and have the potential to make it big in the market. It currently has an AUM of Rs 9,699 crore.

Tata Small Cap Fund looks to identify growth-oriented sound stocks available at reasonable valuations. The fund usually invests about 85-95% of its assets in stocks of small-sized companies, compared to the category average of about 75%.

Its top holdings include BASF India, Godrej Industries, Time Technoplast, Kirloskar Pneumatic Company, and Quess Corp.

Since October 2024 Tata Small Cap Fund's NAV has witnessed a decline of 11.9% higher than the decline of 10.5% in its benchmark Nifty Small Cap 250 - TRI index.

For more information check out Tata Small Cap Fund's factsheet.

#5 SBI Small Cap Fund

Launched in September 2009, SBI Small Cap Fund is the third-largest scheme in the Small Cap Fund category, with an AUM of Rs 33,496 crore.

SBI Small Cap Fund follows a blend of growth and value style of investing. The fund looks to invest in high-growth-oriented multi-bagger stocks of small-sized companies with an eye on valuations. The fund invests around 80-85% of its assets in small caps and the balance in mid caps and cash.

Its top holdings include Blue Star, Kalpataru Projects International, Chalet Hotels, Finolex Industries, and Doms Industries.

Since October 2024 SBI Small Cap Fund's NAV has witnessed a decline of 10.8% compared to a decline of 11.5% in its benchmark BSE 250 Small Cap - TRI index.

For more information check out SBI Small Cap Fund's factsheet.

Conclusion

Small Cap Funds are inherently volatile and tend to witness sharp corrections during bearish market conditions. These funds are particularly vulnerable to sharp fluctuations in NAV during uncertain and tough economic conditions, compared to their large-cap and mid-cap peers.

However, Small Cap Funds have high long-term growth potential, giving them the ability to create substantial wealth for Investors. Therefore, investors who have a long-term investment horizon and are aware of the risks involved do not necessarily need to worry about short-term decline in NAVs.

That said, one should take cognisance of one's investment objectives as well as the specific performance of the fund across both upside and downside market phases to determine whether one should stay the course or make any adjustments to the portfolio.

Maintaining a well-diversified portfolio of equity mutual funds spread across sub-categories can reduce the impact of market fluctuations, enabling better risk-adjusted returns over a period.

Watch this video to know about the best performing Small Cap Funds that are worth monitoring in 2025:

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The securities quoted are for illustration only and are not recommendatory.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.