Video summary

Top 5 Small Cap Funds That Beat the Benchmark | Complete Analysis

Main summary

Key takeaways

Finance

Market/Category Context & Benchmark

  • India small-cap mutual funds

    • 36 small-cap mutual funds; category AUM crossed ₹4 lakh crore.
    • Definition (AMFI/SEBI style): small-cap equity mutual funds investing ≥ 65% in small-cap companies.
    • Small-cap cutoff: ranked 251 and below by market cap.

  • Benchmark: BSE 250 Small Cap

    • Over last 3 years: CAGR 17.74%
    • (Also referenced elsewhere as ~18.75% / 20.42%—likely different benchmark/version/period references due to subtitle inconsistencies.)

  • Selection goal (as per video): identify top 5 small-cap funds with CAGR > 20% over the last 3 years.

Methodology / Framework Used in the Video (as described)

  • Screened funds using Rupee Wealth’s mutual fund screener (Equity Small Cap category).
  • Shortlisted based on:
    • 3-year returns vs the benchmark
    • additional “other parameters” / risk & portfolio discipline metrics, such as:
      • Sharpe ratio
      • capture ratios
      • turnover
      • beta / standard deviation
  • For each shortlisted fund, the analysis highlights:
    • portfolio evolution by sector
    • top holdings / stock selection
    • risk metrics (Sharpe, beta, standard deviation, upside/downside capture)
    • (where mentioned) portfolio construction rules (e.g., cash buffer when valuations are rich)

The 5 Funds

5) Bank of India Small Cap Fund

Key fund info

  • Launched: Dec 2018
  • AUM: ~₹2,300 crore
  • 3-year CAGR: 21.80% vs benchmark 20.42%
  • Outperformance: ~+1.38%
  • Sharpe ratio: 74 (reported as higher vs category & benchmark per narrator)
  • Portfolio turnover: 78% (suggests disciplined changes, not constant reshuffling)

Portfolio / sector evolution

  • Industrial Products & Manufacturing: 9.7% (2024)
  • 2025: manufacturing / pharma / finance each about 8–9%
  • 2026: Electrical equipment becomes largest at 9.73%

Notable holdings & catalysts

  • Lloyds Metals
    • First bought: Oct 2024
    • Stock nearly tripled between Jul 2023–Jun 2026
    • Capacity/mining scale expanded
  • Volcar (first bought Nov 2024; ticker not clearly identified)
    • Price moved from ~230 to 2000 over ~3 years
    • Antibiotic pipeline growth + USFDA approval for an antibiotic drug

Explicit “why it worked” (as framed)

  • Shift toward industries with clearer growth/earnings visibility
  • Strong contribution from stock selection to fund returns

4) Mahindra Manulife Small Cap Fund

(subtitle: “Mahindra manual salc fund”)

Key fund info

  • AUM (by May 2026): ~₹4,591 crore
  • Direct expense ratio: 0.43%
  • 3-year CAGR: 24.21% vs benchmark 18.75%
  • Upside capture: 97 (captures nearly equal/better than benchmark in rising markets)
  • Downside capture: 80 (losses controlled somewhat in down markets)

Investment approach

  • Uses GCMV framework:
    • Growth, Cash Flow, Management, Valuation
  • Fund manager changes: 3 managers between Oct 2024–Feb 2026, but no major philosophy change (per video)

Sector allocation changes (FY24 → FY26)

  • Capital goods: stayed largest; maintained ~19%
    • supported by government manufacturing & infrastructure focus
  • Health care: 3.63% → 12.43%
  • Automobiles & Auto components: 3.66% → 11.55%
    • linked to localization/export/supply-chain participation
  • FMCG: 7.10% → 4.29%
    • described as muted earnings growth + demand slowdown + valuation concerns

Core message

  • Sector rotation aligned to business cycles/earnings outlook supported performance

3) Invesco India Small Cap Fund

Key fund info

  • AUM: ₹11,717 crore
  • 3-year CAGR: 22.43% vs benchmark 18.75%

Portfolio evolution

  • Capital Markets: 12.60% (2024) → 14.55% (2025) → 5.89% (2026)
  • Health care services: 4.31% → 12.09%
  • Banks: 5.94% → 10.15%

Macro/industry rationale cited

  • Healthcare: hospital capacity expansion
    • >4,000 beds planned in FY2025
    • ~3,400 more beds in FY2026
    • support from rising health insurance penetration and medical tourism
  • Banking/asset quality:
    • Gross NPAs: 11.46% (2018) → 2.31% (2025)
    • Credit growth: lending growth for upper/middle-tier NBFCs > 21% YoY as of Sep 2025

Risk/portfolio construction metrics

  • Holdings between 67–74 companies
  • No single stock weight > 5% (limits concentration risk)
  • Investors named: Tahir Badshah and Aditya Himani
  • Risk metrics:
    • Beta: 0.83 (vs category higher per narrator)
    • Standard deviation: 19.41 (lower than category)
    • Downside capture: 72 vs category avg 81
  • Philosophy: long-term fundamental growth drivers; consistent portfolio structure

Tickers

  • None explicitly stated in subtitles

2) ITI Small Cap Fund

Key fund info

  • EUM/AUM (as of May 2026): ₹334 crore (subtitle says “EUM”)
  • 3-year CAGR: 26.28% vs benchmark 20.42%

Portfolio positioning (allocation shifts)

  • Capital goods: 24.98% (2004? subtitles likely mean FY24) → 15.36% (2026)
  • Financial services: 18.95% → 22.68%
  • Health care: 7.26% → 16.32%

Named fund managers

  • Dhimansh Shah
  • Alok Ranjan

Top holdings / catalysts (company-specific)

  • Acutus Chemicals (largest holding in FY26)
    • Capex plan > ₹100 crore in:
      • battery chemicals
      • semiconductor chemicals
      • advanced pharmaceutical intermediates
    • Expanding contract development & manufacturing organization business
    • FII holdings: 6.73% → 19.48% (same period)
  • Kirloskar Oil Engines
    • Capex plan: ₹1,400 crore to expand engine manufacturing at Kagal plant
    • Secured order: 192 MW data centre power systems from Hyper Nex (entity name as written)

Risk metrics

  • Beta: ~0.85
  • Sharpe ratio: 1.07 (described as comparatively stronger risk-adjusted returns)

1) Bandhan Small Cap Fund

(highest returns in the list)

Key fund info

  • AUM (by May 2026): ₹27,219 crore (largest among the five)
  • Direct expense ratio: 0.33% (lowest in the list)
  • Fund leadership/research: Manish Gunwani (from “Jain 2023” per subtitle; likely earlier context)
  • 3-year CAGR: 30.39% vs benchmark 18.75%
  • Lead vs benchmark: ~+12% (highest in the list)
  • Alpha: 9.06 (excess returns over benchmark)
  • Sharpe ratio: 1.08 (risk-adjusted outperformance)
  • Emphasis: outperformance not merely from higher risk (alpha + Sharpe framing)

Investment/research framework (explicit filters)

  • Focus on finding multibaggers while controlling risk
  • Stock selection filters (3):
    • Quality
    • Growth
    • Reasonable valuation
  • Portfolio construction rule:
    • When valuations appear expensive, maintain a cash buffer of 10–12%
    • Even in May 2026, about ~10% held in cash & equivalents
  • Concentration control:
    • Top 10 holdings combined weight < 30%

Portfolio evolution & sector reweighting (3 years)

  • Capital goods + industrials: ~22% → 10%
  • Financial services + real estate: increased to ~36%

Top holdings / examples

  • Shobha LED (largest holding)
    • Record residential presales and project launches in FY25–26
    • Stock price nearly tripled between Jul 2023–Jun 2026
  • Also cited:
    • State Bank of India
    • REC
    • Chola Mandalam Financial Holdings
  • “Earnings growth segments” emphasized: banking, infrastructure financing, retail lending

Tickers

  • None explicitly presented as tickers; company names are included as above

Disclosures / Disclaimers

  • Mutual fund risk disclaimer (as stated at end):

    “Mutual fund investments are subject to market risk. Read all scheme related documents carefully.”

Presenters/Sources Mentioned (end)

  • Rupee Wealth: used for the mutual fund screener during selection
  • AMFI and SEBI: used for small-cap definition/classification reference
  • ICRA: cited for healthcare/hospital capacity planning and/or banking context (per subtitle)
  • Fund managers named:
    • Bank of India Small Cap Fund: subtitle indicates “he/him” (no clear name)
    • Tahir Badshah, Aditya Himani (Invesco India Small Cap)
    • Dhimansh Shah, Alok Ranjan (ITI Small Cap)
    • Manish Gunwani (Bandhan Small Cap)

Original video