Nippon India Mutual Fund has seen three of its flagship schemes post over 20% returns since 2013. While these funds have shown strong long-term wealth creation through systematic investing, investors must balance these gains against the inherent volatility associated with small-cap and thematic investments.
What Happened
Nippon India Mutual Fund has reported strong long-term performance across three of its major equity schemes. Since their inception on January 1, 2013, the Nippon India Small Cap Fund, Nippon India Growth Mid Cap Fund, and Nippon India Power & Infra Fund have each generated returns exceeding 20% in terms of annualised growth. Data suggests that a consistent monthly Systematic Investment Plan (SIP) of Rs 10,000 in these funds has grown to nearly Rs 40 lakh over the period, highlighting the impact of long-term disciplined investing in equity markets.
Performance Of The Three Schemes
The Nippon India Small Cap Fund has delivered a return of 24.11% since its launch. Managed by Samir Rachh, the fund has maintained a competitive expense ratio of 0.54%. In the last three years, it has outperformed its benchmark, the BSE 250 SmallCap TRI. The fund focuses on the industrial and financial sectors.
The Nippon India Growth Mid Cap Fund, managed by Rupesh Patel, has returned 18.38% since inception with an expense ratio of 0.62%. Its three-year performance has been robust, surpassing the BSE 150 MidCap TRI. It holds significant investments in companies like BSE and Fortis Healthcare.
The Nippon India Power & Infra Fund, managed by Rahul Modi, has yielded 15.48% since launch. Despite having a higher expense ratio of 0.82%, it has posted an impressive 3-year average annual return of 26.28%, beating the BSE India Infrastructure TRI.
The Reality Of 'Very High Risk'
All three schemes are classified as 'Very High Risk' by the fund house. This is standard for small-cap, mid-cap, and thematic funds, but it is an important factor for investors to understand. Small-cap and mid-cap stocks are generally more sensitive to market downturns than large-cap stocks. When the overall market falls, these funds often see sharper declines. Thematic funds, such as the Power & Infra scheme, depend heavily on specific sector growth, meaning they can face pressure if government spending or energy demand fluctuates.
Understanding Risk-Adjusted Returns
To measure how much risk these funds took to generate their returns, analysts often look at Sharpe and Sortino ratios. These numbers help show if a fund is providing good returns relative to the risk it is taking. For example, the Power & Infra fund has shown a Sortino ratio of 1.52, which suggests the fund has historically managed downside risk—or the risk of losing money—better than the broader category. However, these ratios are based on past data and do not guarantee future performance.
What Investors Should Monitor
While past returns are encouraging, investors should look beyond historical performance. The primary monitorable is the suitability of these funds for one’s own financial goals. Small-cap and mid-cap investments typically require a longer holding period to ride out market volatility. Additionally, investors should track the expense ratio, as higher costs can eat into long-term returns. Finally, sector-specific funds like the Power & Infra fund require investors to monitor government policy changes and sector demand, as these factors directly drive performance in such thematic portfolios.