HDFC Small Cap Fund: How It Multiplies Wealth Over Time?

Overview of HDFC Small Cap Fund

Are you struggling to find the right investment that helps you multiply your money? If yes, then HDFC Small Cap Fund is exactly what you need for investment.

It is a small category equity fund by HDFC Mutual Fund, which is one of the largest Asset Management companies. The fund started in the years 2008 and for the last 17 years, it has been helping investors to make high returns. It primarily focuses on investing in small-sized companies whose market value is less than Rs. 5000 crores. If you look at the NAV (Net Asset Value) of the fund, it is Rs. 118.08 as of February 2025. Over the past few years, the fund has gained the attraction of so many investors because of its high growth. In 2018 and 2022, the fund outperformed its benchmarks over a five-year span. It will be interesting to know how the fund can generate the same growth for you.

This article will help you cover everything about the HDFC small cap scheme. In this guide, you will explore its growth investing strategy, the Affordable SIP Plan, and what you should know before investing in the fund. So keep reading to explore everything.

What is the Investment Strategy of the HDFC Small Cap Fund?

The HDFC small cap fund regular growth follows a proven strategy of investing that helps to achieve higher returns. It targets small companies for investment that have higher growth potential. It allocates 80-90% of its assets to small companies.

To identify the quality stocks, the fund uses bottom-up stock selection. A team of experts evaluates every individual company and checks its past performance, market conditions, and future growth possibilities. They also spread the portfolio into different sectors to reduce the risk and maintain performance.

Instead of short-term gains, the fund focuses on investing money in small companies for the long term. It helps the fund to turn short-term losses into higher growth potential.

This investment strategy is the reason why the fund is making consistent growth. The fund showed a CAGR of 15.72% from the day of its inception, which shows how effective the fund strategies are for long-term growth.

Top Benefits of Investing in HDFC Small Cap Fund

The HDFC small cap fund not only helps you to make higher returns but also makes investing easy. Here are some of the benefits you get by investing in the fund:

1. Long-Term Wealth Creation

The fund focuses on investing in quality small companies that are consistently growing. By investing in the fund, you can generate long-term wealth with small cap companies that have long-term growth potential.

2. Diversified Portfolio

If you want your portfolio to get diversified into different sectors, then the HDFC small cap fund growth plan does this effectively. It uses strong research to smartly spread the portfolio into different sectors, which helps to reduce the risk and make better returns.

3. Tax Benefits

The fund helps you save a large amount of tax on your investment. When you redeem your profits, which is about Rs. 1 Lakh, then only 10% of the tax applies on your returns. This helps you to savea  large amount of money that you were paying as tax.

Who is the Fund Manager of HDFC Small Cap Fund?

The person who manages the HDFC small cap fund regular growth is Sankalp Baid. He was appointed as a new fund manager in 2021 after Chirag Setalvad. He comes with 13 years of valuable experience in macroeconomics and fund management. He was also a part of BNP Paribas Bank as an Assistant Vice President before joining HDFC Mutual Fund. As of February 2025, he is managing an AUM (Asset Under Management) of Rs. 31,230 crores.

If you look at his educational qualifications, he has a PG Diploma in Business Management degree, a Chartered Accountant, and a Bachelor in Commerce. Apart from small cap fund, he also manages a few other HDFC schemes such as Arbitrage Fund, Balance Advantage Fund, Debt Fund, etc.

In the past few years, he has earned a strong name in the mutual funds market. The reason behind this is its proven investment strategies. He picks profitable stocks based on strong market research and company performance. He also emphasizes the importance of diversification and spreads portfolios across different sectors.

His strategies helped the fund to grow over time and grow investors money. His investment approach shows that he is not only focused on the fund's growth but also values investors money.

What to Look for When Investing in the HDFC Small Cap Fund?

Investing in HDFC small cap fund is a smart choice to grow your wealth. By considering a few factors, you can make investing even more interesting:

1. Risk Factors

The fund has to face higher volatility due to investing a large number of assets in small companies. This approach sometimes causes short-term losses, so if you are planning to invest, make sure you have a higher risk tolerance.

2. Investment Horizon

If you are planning to invest in the HDFC small cap fund growth plan, then its recommended to invest for at least 5-7 years. Because the fund faces higher volatility, it invests for the long term to reduce the risk and make higher returns for investors.

3. Tax Implications

HDFC small cap scheme has different tax implications according to how you redeem your profits. If you redeem within one year, then a 15% tax will apply on your investment. If you redeem after one year and profits are above Rs. 1 Lakh, then 10% tax will apply on your investment.

Why HDFC Small Cap Fund is Good for Long Term Investment?

The HDFC small cap scheme holds a strong position in the mutual fund market. Let's explore why it is a great scheme for long-term investors:

1. High Growth Opportunity

The fund invests in growing small cap companies that have the potential to become mid cap tomorrow. When these companies expand their size, their stock prices will increase and you will make high returns in the long term.

2. Affordable Investment Plan

If you are looking to invest for the long term by investing a small fixed amount at set times, then the fund is a great choice for you. It provides SIP investment that helps you to grow your money over time.

3. Zero Exit Load

If you withdraw your profit within 1 year of investment, you have to pay a 1% exit load on your profit. But the amazing thing is, when you redeem your returns after 1 year, then you do not have to pay any exit load.

Conclusion

In short, the HDFC small cap scheme is a great investment solution for investors who want to generate higher returns. As an investor, sometimes it is hard to invest a large sum of money, but the fund makes it easy by providing an SIP plan. You can invest in a systematic plan and grow your money over time by investing a fixed amount at set times.

So, if you are looking for an investment that helps you to grow your money over time without investing a large amount, then investing in the HDFC small cap fund might be a great choice. Its proven investing strategy and strong fund management help you to grow your money while managing the risk.