An Empirical Study on Risk–Return Performance of Small-Cap Mutual Funds in India

Abstract: Small-cap mutual funds are emerging as the most credible means for almost all investors to learn capital appreciation in the long run through investments in small-cap emerging companies. These schemes typically invest in companies that are smaller in market capitalization and that offer lower growth but come with a higher risk and volatility. In India, in recent years, small-cap funds have stirred up a lot of attention among investors because of their delivery during favourable market conditions.

The increasing and effective participation of retail investors, in addition to online-based infrastructure for investments, has played a great role in expansion of small-cap MF investments in the Indian Market. However, performances of schemes tend to vary widely owing to the numerous, ever-changing circumstances of the markets and portfolio strategies as well as fund management methods. Thus, a careful analysis is needed to understand how these schemes perform when compared with broad and reliable benchmark indices such as the BSE SC 250 and NIFTY SC 250.

This study focuses on analyzing the risk–return performance of selected small-cap mutual fund schemes using quantitative tools. Measures such as Avg return, Stand devia, beta, SR, TR, J’s Alpha are used to assess both absolute and risk-adjusted performance. Together, these indicators provide a clear picture of how efficiently the funds perform and how they respond to market fluctuations.

This study's findings will help investors identify small-cap mutual fund schemes that perform better, and it will inform them to take enlightened investment decisions through objective analysis of performance.

Keywords: Small-Cap Mutual Funds, Risk-Return Analysis, Fund Performance, and Benchmark Indices SR, TR, J's Alpha, Investment Evaluation will be the keywords.