Nippon India small cap fund vs Canara Robeco small cap fund: Which one should you choose?

When it comes to investing in small-cap stocks, two popular funds stand out: Nippon India Small Cap Fund and Canara Robeco Small Cap Fund. Both funds have their own characteristics and appeal to investors with a high risk tolerance. This article aims to provide an in-depth comparison of these two funds, including performance, strategy, expenses, and more, to help potential investors make an informed decision.

Investment Strategy

Both the Nippon India Small Cap Fund and Canara Robeco Small Cap Fund invest in small-cap stocks with a market capitalization of less than Rs. 50 billion, aiming for long-term capital appreciation. The strategies of the two funds differ slightly.

The Nippon India Small Cap Fund employs a diversified approach, investing in a broad array of small-cap stocks across various sectors. This diversification may offer a balanced risk profile. Meanwhile, Canara Robeco Small Cap Fund puts emphasis on fundamentally strong companies that exhibit significant growth prospects. The fund manager focuses on businesses with sustainable competitive advantages, potentially offering a more targeted investment approach.

Fund Manager Information

The Nippon India Small Cap Fund is managed by Mr. Siddhartha Khemka, who brings over 15 years of experience to the table. His knowledge and expertise in the field of small-cap investments have shaped the fund’s success.

On the other hand, Canara Robeco Small Cap Fund is guided by Mr. Anand Radhakrishnan, a seasoned professional with over 20 years of experience. His insights and strong track record contribute to the fund’s performance. Both managers are well-qualified, and their respective strategies are meticulously aligned with the funds’ objectives, reflecting a strong commitment to investors.

Expense Ratios

The expense ratios for both funds are a crucial factor to consider. Nippon India Small Cap Fund charges an expense ratio of 0.75%, whereas Canara Robeco Small Cap Fund has a higher expense ratio of 0.99%. This difference might seem minimal but can significantly impact net returns over the long term. The lower expense ratio of the Nippon India Small Cap Fund could translate into higher net returns for investors, making it an attractive option for cost-conscious individuals.

Portfolio Composition

Although both funds invest in small-cap stocks, their portfolio compositions reveal subtle differences. As of March 31, 2023, both funds share similarities in their top 10 holdings, including prominent names like Indiabulls Housing Finance Ltd., NIIT Technologies Ltd., Adani Enterprises Ltd., and others.

However, the weightage assigned to each company varies between the funds. This divergence in portfolio composition reflects the two funds’ distinct investment philosophies and risk management strategies, influencing their respective performance and risk profiles.

Risk Profile

Both Nippon India Small Cap Fund and Canara Robeco Small Cap Fund are categorized as high-risk investments. This categorization stems from their focus on small-cap stocks, known for their volatility and susceptibility to market fluctuations. While the potential for substantial returns exists, investors must also be prepared for significant losses. Understanding this risk is essential before committing capital to these funds, and a clear assessment of one’s risk tolerance is advisable.

Minimum Investment Requirements

Accessibility is also a factor to consider. The minimum investment requirement for Nippon India Small Cap Fund is Rs. 500, while for Canara Robeco Small Cap Fund, it’s Rs. 1,000. This lower threshold for Nippon India Small Cap Fund may attract a broader range of investors, including those new to investing or those with limited capital.

Final Thoughts

Both Nippon India Small Cap Fund and Canara Robeco Small Cap Fund are strong contenders for those looking to invest in the small-cap segment. Nippon India Small Cap Fund has a slight edge in terms of returns, expenses, and ratings. However, the choice between these two funds should be guided by individual circumstances, investment goals, and risk tolerance. Engaging with a financial advisor to align with personal objectives might be a wise next step.