Top MFs: HSBC Small Cap Equity Fund

Objective

HSBC Small Cap Equity Fund is Open-ended Small Cap Equity scheme which belongs to HSBC Mutual Fund House.

The scheme seeks to generate long-term capital growth from an actively managed portfolio of equity and equity related securities of predominantly small cap companies.

Fund Highlights

The fund was launched on May 19, 2005. This fund has been in existence for 16 yrs 9 m, having been launched on 12/04/2005.

HSBC Small Cap Equity Fund-Growth has ₹352 Crores worth of assets under management (AUM) as on 31/12/2021 and is medium-sized fund of its category.

The fund has an expense ratio of 2.51%, which is higher than what most other Small Cap funds charge.

The expense ratio of the fund is 2.51% for Regular plan as on Sep 30, 2021.

It is benchmarked against S&P BSE 250 SmallCap Total Return Index.

Fund attract an exit load of 1% if redeemed within 1 year"

Minimum investment required is Rs 5000 and minimum additional investment is Rs 1000. Minimum SIP investment is Rs 500.

Returns

HSBC Small Cap Equity returns of last 1-year are 59.43%. Since launch, it has delivered 14.25% average annual returns. The fund has doubled the money invested in it every 2 yrs.

Its trailing returns over different time periods are: 64.78% (1yr), 22.0% (3yr), 16.01% (5yr) and 13.99% (since launch). Whereas, Category returns for the same time duration are: 64.03% (1yr), 25.49% (3yr) and 18.29% (5yr).

Sector and stock wise exposure

The fund has the majority of its money invested in Chemicals, Engineering, Services, Technology, Construction sectors. It has taken less exposure in Chemicals, Engineering sectors compared to other funds in the category.

The fund's top 5 holdings are in Dixon Technologies (India) Ltd., Radico Khaitan Ltd., Carborundum Universal Ltd., Mastek Ltd., APL Apollo Tubes Ltd..

Tax Implications

1. Gains are taxed at a rate of 15% (Short-term Capital Gain Tax - STCG) if units are redeemed within 1 year of investment.

2. For units redeemed after 1 year of investment, gains of upto Rs. 1 lakh accruing from those units in a financial year shall be exempted from tax.

3. Gains of more than Rs. 1 lakh will be taxed at a rate of 10% (Long-term Capital Gain Tax - LTCG).

4. For Dividend Distribution Tax, the dividend income from this fund will get added to the income of an investor and taxed according to his/her respective tax slabs.

5. Also, for dividend income in excess of Rs 5,000 in a financial year; the fund house shall deduct a TDS of 10% on such income.

Fund Manager

The HSBC Small Cap Equity Fund is managed by Ankur Arora (Since Aug 05, 2019).

Expert Comment

When you invest for seven years or more, you can expect gains that comfortably beat the inflation rate as well as returns from fixed income options. HSBC Small Cap Equity Fund scheme's ability to deliver returns consistently is in-line with most funds of its category. Its ability to control losses in a falling market is average. The suggested investment horizon of investing into HSBC Small Cap Equity Fund is >3 years. The suggested investment horizon is the minimum time required for holding investments in the fund to reduce its downside risk and ensure that the returns become more predictable.