Which Manages Downside Better – SBI or Axis Small Cap?
Small cap funds provide you with promising returns, but they also come with an inherent risk during bear runs. The real test for small cap mutual funds isn’t during a rally. It’s how well it preserves your capital during those volatile periods. Both SBI and Axis are popular names in the small-cap segment in India. However, when markets turn volatile, one handles the downside slightly better.
In this blog, we have evaluated the performance of these two small cap funds. Check out real performances in the market during phases like the COVID-19 pandemic and the global correction of 2022.
Fund Overview and AUM
SBI Small Cap Fund was launched in 2009 and has a massive AUM of INR 35,584.85 crore. It’s one of the largest in this category.
On the other hand, the Axis Small Cap Fund was launched in 2013 and presently manages INR 25,975.38 crore.
Historical Performance Analysis During Bear Runs
We have evaluated the performance of these two small-cap funds during turbulent periods of 2020 and 2022.
| Year/Month | SBI Small Cap (%) | Axis Small Cap (%) |
| Jan 2020 | 8.80 | 6.68 |
| Feb 2020 | 0.25 | -2.36 |
| Mar 2020 | -28.77 | -25.47 |
| Apr 2020 | 12.81 | 12.85 |
| May 2020 | 0.04 | -0.26 |
| Jun 2020 | 4.66 | 7.01 |
| Jul 2020 | 5.40 | 4.24 |
| Aug 2020 | 8.25 | 11.33 |
| Sep 2020 | 3.80 | 2.37 |
| Mar 2022 | 5.27 | 3.28 |
| Apr 2022 | -1.71 | 1.37 |
| May 2022 | -4.62 | -3.69 |
| Jun 2022 | -3.65 | -5.04 |
| Jul 2022 | 7.29 | 8.00 |
| Aug 2022 | 3.72 | 5.31 |
| Sep 2022 | 0.47 | 1.53 |
Both the funds faced sharp drops during the crash in March 2020, when Covid-19 gripped the world. SBI Small Cap dropped 28.77%, while Axis Small Cap fell 25.47%. However, the Axis Small Cap fund recovered quickly in the following months, showing resilience between April to August.
In 2022, inflation led to a bear run across the world. Axis Small Cap once again displayed better resilience with smaller monthly losses in April and May. It also showed stronger rebounds in July and August.
This trend shows the ability of Axis to cushion volatility during volatile phases.
Portfolio Construction and Risk Metrics
The portfolio construction of these two funds defines how they manage downsides. Axis Small Cap spreads its assets across 138 stocks, which is more than double compared to SBI, which invests in 65 stocks. This reveals that the investments of SBI small cap funds are more concentrated. This provides better upside during bull runs, but it also leads to higher volatility when markets dip.
Which Small Cap Fund Should You Choose?
Axis Small Cap Fund can be suitable for investors looking to smoothly sail through volatile markets. The fund managers have tactically diversified their portfolio well.
However, if you trust the legacy of SBI and want to invest in a small cap fund with a slightly lower expense ratio, SBI can be suitable.
Conclusion
In the small-cap category, both SBI and Axis mutual funds have performed exceptionally well. Both these two funds have delivered over 25% returns in the last five years. However, when it comes to risk management, the Axis Small Cap fund takes a slight lead.
Ultimately, it comes down to your risk tolerance. Are you willing to take on risks and ride aggressive bull markets? Or want to approach opportunities with better control over losses during turbulent phases? Your investment philosophy should help you choose between the two popular small cap funds.
In any case, stay disciplined and invested, as ultimately, it’s resilience that defines your wealth management strategy.
