Introduction
Investing in mutual funds is one of the most effective ways to build long-term wealth. Among the many options available, small-cap funds have attracted a lot of attention because of their potential to deliver high growth. One such fund that has consistently been in the spotlight is the Nippon India Small Cap Fund.
Launched in 2010, this fund has built a reputation for giving superior long-term returns, although it also carries high risk due to the nature of small-cap investing. If you are someone looking to explore the small-cap category or understand whether Nippon India Small Cap Fund is worth your investment in 2025 and beyond, this detailed review will guide you through every aspect — from its history, yearly performance, and SIP analysis to its risks and future outlook.
🕒 Fund Overview and Background
- Fund Name: Nippon India Small Cap Fund
- Category: Equity – Small Cap
- Launch Date: 16 September 2010
- Fund House: Nippon Life India Asset Management Ltd. (formerly Reliance Mutual Fund)
- Fund Manager (as of 2025): Mr. Samir Rachh
- Benchmark: NIFTY Small Cap 250 TRI
- Assets Under Management (AUM): Around ₹66,000 Crore (as of September 2025)
- Expense Ratio (Direct Plan): ~0.8% | Regular Plan: ~1.4%
- Exit Load: 1% if redeemed within 1 year
The Nippon India Small Cap Fund is designed to provide long-term capital appreciation by investing primarily in small-cap companies — businesses that are still growing and have the potential to become mid or large-cap companies in the future.
📊 Fund Philosophy
This fund follows a bottom-up approach to stock picking, focusing on companies that are fundamentally strong but not yet discovered by the wider market. The fund manager seeks out businesses with solid growth potential, good management quality, and strong balance sheets.
Key strategies include:
- Diversified portfolio: Over 150+ stocks to spread risk.
- Long-term focus: Emphasis on companies that can scale over 5–10 years.
- Active management: Regularly rebalancing holdings to capture new opportunities.
While this approach has historically led to high returns, it also means the fund can be volatile during short-term market corrections.
📈 Historical Performance (Year-Wise Returns)
Let’s take a detailed look at how Nippon India Small Cap Fund has performed over the years.
| Year | Annual Return (%) | Category Average (%) | Benchmark (Nifty Smallcap 250 TRI) |
|---|---|---|---|
| 2016 | +7.1% | 6.3% | 7.5% |
| 2017 | +58.5% | 55.2% | 57.8% |
| 2018 | -17.2% | -14.6% | -16.9% |
| 2019 | +2.9% | +4.2% | +3.1% |
| 2020 | +30.3% | +27.1% | +28.5% |
| 2021 | +72.6% | +66.5% | +69.8% |
| 2022 | +3.4% | +2.7% | +3.8% |
| 2023 | +48.0% | +45.1% | +46.2% |
| 2024 | +25.4% | +23.7% | +24.8% |
| 2025* | -6.4% (YTD) | -5.2% | -6.1% |
As of October 2025 (based on ETMoney & Economic Times data)
👉 Since inception (2010–2025): CAGR ~20.6%
👉 Last 5 years: CAGR ~32.3%
👉 Last 3 years: CAGR ~22.2%
| Period Invested for | ₹10000 Invested on | Latest Value | Absolute Returns | Annualised Returns | Category Avg | Rank within Category |
|---|---|---|---|---|---|---|
| 1 Week | 24-Oct-25 | 10045.10 | 0.45% | – | 0.67% | 24/33 |
| 1 Month | 30-Sep-25 | 10325.20 | 3.25% | – | 3.76% | 21/33 |
| 3 Month | 31-Jul-25 | 10104.20 | 1.04% | – | 1.36% | 17/33 |
| 6 Month | 30-Apr-25 | 11085.20 | 10.85% | – | 12.94% | 25/32 |
| YTD | 01-Jan-25 | 9733.80 | -2.66% | – | -1.41% | 18/31 |
| 1 Year | 31-Oct-24 | 9688.10 | -3.12% | -3.12% | -1.29% | 20/30 |
| 2 Year | 31-Oct-23 | 14148.50 | 41.48% | 18.92% | 18.83% | 10/27 |
| 3 Year | 31-Oct-22 | 18562.20 | 85.62% | 22.87% | 20.49% | 7/25 |
| 5 Year | 30-Oct-20 | 41341.90 | 313.42% | 32.78% | 28.27% | 2/23 |
| 10 Year | 30-Oct-15 | 64446.00 | 544.46% | 20.46% | 16.88% | 1/15 |
| Since Inception | 16-Sep-10 | 171176.20 | 1611.76% | 20.64% | 17.29% | 11/33 |
Interpretation:
This fund has shown phenomenal long-term performance — with massive gains in bull markets like 2017, 2021, and 2023. However, years like 2018 and 2025 (YTD) remind us that small-cap funds can see sharp corrections when markets turn volatile.
💰 SIP Return Analysis (Systematic Investment Plan)
Let’s understand how SIP investors have benefited over time.
| SIP Duration | Monthly SIP (₹) | Total Investment (₹) | Current Value (₹) | CAGR |
|---|---|---|---|---|
| 3 years | ₹2000 | ₹72,000 | ₹1,04,500 | 21.9% |
| 5 years | ₹2000 | ₹1,20,000 | ₹2,24,700 | 27.8% |
| 7 years | ₹2000 | ₹1,68,000 | ₹3,91,600 | 29.2% |
| 10 years | ₹2000 | ₹2,40,000 | ₹7,36,200 | 28.5% |
Based on historical returns data till Oct 2025.
✅ Insight: Long-term SIP investors have nearly tripled their capital over 7–10 years.
❌ Short-term SIPs (less than 3 years) may face volatility.
Compare performance
| Category | 1 D | 1 M | 3 M | 6 M | YTD | 1 Y | 2 Y | 3 Y | 5 Y |
|---|---|---|---|---|---|---|---|---|---|
| This Fund | -0.51% | 3.25% | 1.04% | 10.85% | -1.97% | -3.12% | 18.92% | 22.87% | 32.78% |
| Nifty 50 | -1.27% | 4.51% | 3.85% | 5.70% | 8.79% | 6.27% | 16.09% | 12.60% | 17.16% |
| Benchmark: Nifty Smallcap 250 TRI | -0.63% | 3.74% | 1.21% | 13.18% | -1.98% | -1.90% | 20.69% | 23.44% | 29.27% |
| Category Average | -0.39% | 3.76% | 1.36% | 12.94% | -1.41% | -1.29% | 18.83% | 20.49% | 28.27% |
| Category Rank | 22/33 | 21/33 | 17/33 | 25/32 | 18/31 | 20/30 | 10/27 | 7/25 | 2/23 |
| Best in Category | 0.26% | 6.84% | 6.42% | 19.82% | 4.28% | 4.93% | 31.40% | 30.89% | 33.66% |
| Worst in Category | -1.02% | -0.27% | -4.02% | 8.61% | -9.82% | -9.47% | 14.45% | 14.34% | 23.31% |
Portfolio Composition
As of September 2025, the fund is invested across more than 160 companies, offering high diversification.
Sector Allocation:
- Capital Goods – 16%
- Financials – 12%
- Consumer Staples – 11%
- Services – 10%
- Healthcare – 9%
- Chemicals & Engineering – 8%
- Others – 34%
Top Holdings:
- HDFC Bank Ltd.
- Multi Commodity Exchange of India Ltd.
- Kirloskar Brothers Ltd.
- Tube Investments of India Ltd.
- NIIT Ltd.
- Cyient DLM Ltd.
- Apar Industries Ltd.
- Grindwell Norton Ltd.
These holdings indicate a balanced exposure across cyclical and defensive sectors — which reduces risk while capturing growth opportunities.
⚠️ Risk & Volatility Analysis
While returns are impressive, the risk level is very high. Here’s what you need to know:
- Standard Deviation: Higher than large/mid-cap funds, meaning greater price fluctuation.
- Beta: Above 1.0 — indicates the fund is more volatile than the market.
- Drawdowns: During market crashes (like 2018 or 2020 March), the fund fell sharply but recovered faster than peers.
- Liquidity Risk: Some small-cap stocks have low trading volumes, which can impact exits.
👉 In short: High risk = High reward
If you have a 7–10 year horizon, the short-term volatility is manageable. But if you panic during downturns, this is not the fund for you.
🌟 Advantages (Pros)
- Superior long-term returns — One of the best-performing small-cap funds in India since inception.
- Strong management — Managed by an experienced team with a disciplined approach.
- Diversified portfolio — Exposure to 150+ stocks reduces single-company risk.
- SIP-friendly fund — Works extremely well for long-term SIP investors.
- Good recovery record — Bounces back quickly after market corrections.
Best Quarters
| Period | This Fund | Nifty 50 | Nifty Smallcap 250 TRI | Category Average |
|---|---|---|---|---|
| Q2 – 2014 | 43.11% | 13.25% | — | 29.26% |
| Q2 – 2020 | 28.62% | 24.82% | — | 21.22% |
| Q2 – 2020 | 26.64% | 24.82% | — | 21.22% |
⚠️ Disadvantages (Cons)
- High volatility — Short-term investors can see large ups and downs.
- Huge AUM size — Over ₹66,000 crore; too large for a small-cap strategy, which may limit agility.
- Over-diversification — Holding 160+ stocks reduces focus and may dilute alpha.
- Higher expense ratio (Regular Plan) — Investors should prefer the Direct Plan for better returns.
- Not suitable for low-risk investors — If you seek stability, this fund isn’t ideal.
Worst Quarters
| Period | This Fund | Nifty 50 | Nifty Smallcap 250 TRI | Category Average |
|---|---|---|---|---|
| Q1 – 2020 | -30.23% | -29.43% | — | -27.1% |
| Q1 – 2025 | -14.79% | -2.43% | — | -4.96% |
| Q1 – 2020 | -29.78% | -29.43% | — | -27.1% |
🧠 Expert Views and Peer Comparison
Analysts and financial experts consistently rate Nippon India Small Cap Fund among the top 3 small-cap funds in India.
Comparison (as of Oct 2025)
| Fund Name | 5-Year CAGR | AUM (₹ Cr) | Risk Level |
|---|---|---|---|
| Nippon India Small Cap Fund | 32.3% | 66,000 | Very High |
| Axis Small Cap Fund | 27.9% | 25,000 | High |
| SBI Small Cap Fund | 30.4% | 28,000 | High |
| Kotak Small Cap Fund | 28.6% | 19,000 | High |
🔮 Future Outlook (2026 & Beyond)
As of 2025, small-cap valuations have become slightly expensive after massive rallies in 2023 and 2024. However, India’s economic fundamentals remain strong, and small-cap companies are expected to benefit from:
- The Make-in-India and PLI (Production-Linked Incentive) schemes
- Growing domestic consumption
- Digitization and financial inclusion
- Infrastructure and manufacturing expansion
Experts expect moderate returns (12–15% CAGR) for the next 3–5 years, compared to 25%+ in the past decade.
💡 Who Should Invest?
✅ Suitable for:
- Long-term investors (7+ years horizon)
- Investors with high risk tolerance
- SIP investors seeking high growth potential
- Those who already have large/mid-cap exposure and want to diversify
❌ Not suitable for:
- Short-term investors
- Risk-averse investors or retirees
- Those looking for stable returns
📋 Key Takeaways
| Parameter | Details |
|---|---|
| Fund Type | Small-Cap Equity |
| Launch Date | 16 Sept 2010 |
| Fund Age | 15 Years |
| AUM | ₹66,000+ Crore |
| Fund Manager | Samir Rachh |
| Benchmark | Nifty Smallcap 250 TRI |
| 5-Year CAGR | 32.3% |
| Risk | Very High |
| Suitable For | Long-term, high-risk investors |
| SIP Friendly | Yes |
| Taxation | 10% LTCG beyond ₹1 lakh; 15% STCG within 1 year |
🏁 Conclusion
The Nippon India Small Cap Fund stands as one of the most consistent wealth creators in the Indian mutual fund industry. Its stellar long-term track record, experienced management, and disciplined approach make it a top choice for investors seeking high growth.
However, investors must remember — small-cap funds are not for the faint-hearted. They demand time, patience, and the ability to handle volatility. If you can stay invested for 7–10 years through market cycles, this fund has the potential to multiply your wealth significantly.
In short: High risk, high return — but only for the patient investor!
Disclaimer
The information provided in this article is for educational and informational purposes only. It should not be considered as financial or investment advice. Mutual fund investments are subject to market risks, including the possible loss of principal. Past performance does not guarantee future results.
Investors are advised to read the Scheme Information Document (SID) and consult a certified financial advisor before making any investment decisions. The author and the website TrendingAdda.in are not responsible for any losses arising out of investments made based on this content.
What is the Nippon India Small Cap Fund?
The Nippon India Small Cap Fund is an equity mutual fund that invests primarily in small-cap companies with high growth potential.
When was the Nippon India Small Cap Fund launched?
It was launched on September 16, 2010, by Nippon India Mutual Fund (formerly Reliance Mutual Fund).
What is the investment objective of this fund?
The main goal is to generate long-term capital appreciation by investing in diversified equity and equity-related instruments of small-cap companies.
What is the minimum SIP amount for Nippon India Small Cap Fund?
The minimum SIP investment amount is ₹500 per month, making it affordable for small investors.
How has the Nippon India Small Cap Fund performed in the last 5 years?
Over the past five years, the fund has delivered an average annual return of around 22–25%, outperforming most of its peers in the small-cap category.
Nippon India Small Cap Fund risky?
Yes, since it invests in small-cap stocks, it carries high volatility but also has higher growth potential for long-term investors.
What is the fund manager’s name?
The fund is managed by Mr. Dhrumil Shah and Mr. Samir Rachh, both experienced professionals in small-cap investments.
Can I invest in this fund for the short term?
It is not recommended for short-term investments. Ideally, investors should have a minimum 5–7 years investment horizon.
What are the key sectors this fund invests in?
The fund invests across multiple sectors such as industrials, chemicals, capital goods, healthcare, and consumer services.
Nippon India Small Cap Fund good for SIP in 2025?
Yes, it remains one of the top-rated small-cap SIP options in 2025, especially for investors seeking long-term wealth creation through disciplined investing.
