List of Best Penny Stock Mutual Funds in India
Low-priced stocks, known as penny stocks with small market capitalisation, are traded at very low prices, usually below Rs 10. However, due to their speculative nature, high volatility, and limited financial information, they are potentially prone to risks. While some investors may be attracted to penny stocks due to their low prices and potential returns, others find it quite challenging. Therefore, in India, mutual fund investments in penny stocks have tried to bridge the gap for those who are hesitant to invest in penny stocks. If you’re considering investing in low-priced stocks in India, mutual funds could provide an avenue to explore.
In this blog, we will learn more about penny stocks held by mutual funds and discover what are the best penny stocks in India that mutual funds invest in. We’ll also guide you through the best penny stock mutual funds.
List of Best Penny Stocks Mutual Funds in India
Let’s have a look at the mutual funds that invest in penny stocks in India:
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the top penny stock mutual funds in India in the list is from 19th December 2024, and is derived from Tickertape Mutual Fund Screener.
🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.
Top Penny Stocks Mutual Funds Overview
Now, let’s discuss the mutual funds with penny stocks for investment below.
SBI Small Cap Fund
Managed by SBI Funds Management Ltd. and backed by the strong legacy of the State Bank of India, this fund invests in a diversified portfolio of small and mid-cap equities to achieve long-term capital appreciation. The expense ratio of 0.67% shows the annual cost of managing the fund, which is relatively low and benefits investors by reducing the impact on returns. The exit load is 1.00%, and the Sharpe ratio of 1.63 reflects strong risk-adjusted returns. This means the fund has delivered high returns for the level of risk undertaken, a positive indicator for investors seeking superior performance. This fund could be an excellent choice for those seeking exposure to the top penny stocks India through mutual funds.
HDFC Small Cap Fund
Operated by HDFC Asset Management Company, this fund aims to achieve long-term capital appreciation by investing in small-cap companies. The expense ratio of 0.68% highlights the cost efficiency of the fund, which directly impacts net returns for investors. An exit load is 1.00,% and the Sharpe ratio of 1.32 indicates good risk-adjusted returns. This means that the fund has been able to balance risk and reward effectively, making it suitable for investors comfortable with moderate risk. This makes it a potential option for those looking to explore high-growth penny stocks indirectly via mutual fund investments.
Axis Small Cap Fund
Managed by Axis Asset Management Company, this fund focuses on long-term capital growth through a diversified portfolio of small-cap equities. The expense ratio of 0.56% is lower compared to peers, ensuring more of the returns go to the investor. With an exit load of 1.00%, it incentivises a long-term investment horizon. The Sharpe ratio of 1.64 suggests robust risk-adjusted performance, making it a strong contender for those seeking to explore the best penny stocks in India through professional fund management.
Nippon India Small Cap Fund
Managed by Nippon India Mutual Fund, this fund aims to generate long-term capital appreciation by primarily investing in small-cap equities while also achieving consistent returns through debt and money market securities. The expense ratio of 0.68% reflects the annual fund management cost, which is moderately low and supports efficient returns for investors. The exit load is 1.00%, and the Sharpe ratio of 1.54 indicates good risk-adjusted returns. This shows that the fund has been able to deliver returns that justify the level of risk taken, making it attractive for investors seeking a balanced mix of risk and reward.
ICICI Prudential Smallcap Fund
Operated by ICICI Prudential Asset Management Company, this fund focuses on achieving capital appreciation by investing predominantly in small-cap companies. The expense ratio of 0.76% is slightly higher compared to peers, which investors should consider as it impacts net returns. The exit load is 1.00%, and the Sharpe ratio of 1.21 reflects decent risk-adjusted returns, indicating that while the fund offers growth opportunities, it comes with relatively higher risk compared to peers.
How to Invest in the Best Penny Stocks in Mutual Funds?
You can easily invest in penny stock mutual funds by following these steps:
- To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
- The next step would be to research and identify the best penny stock mutual fund that aligns with your investment thesis. You can easily select and learn more about the best penny stock mutual funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
- Once you have selected the best funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade model portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered investment experts (also known as smallcase managers)
- smallcase offers over 500+ stock portfolios, created by 200+ managers
Here are a few popular smallcases among new investors:
Disclosures for aforementioned smallcases
What are Penny Stock Mutual Funds?
As the name suggests, penny stock mutual funds are mutual fund schemes that primarily invest in penny stocks in India. Like any other mutual fund, penny stocks owned by mutual funds are managed by professional fund managers. These managers conduct thorough research and analysis, making investment decisions on behalf of investors. Thus, these mutual funds generally adopt a high-risk, high-reward strategy, aiming for substantial returns. If you’re wondering what are penny stocks and how to invest in them effectively, these funds can offer expert-backed solutions.
How Do Penny Stock Mutual Funds Work?
The top penny stocks mutual funds are low-priced and often small-cap equity mutual funds of small companies. These stocks may experience abrupt and substantial increases in value. They are characterised by infrequent trading activity and a limited number of shareholders. Investors may benefit from these penny stock mutual funds in India due to the potential for rapid growth.
Factors to Consider Before Investing in the Best Penny Stocks Mutual Funds
Before investing in the best penny stock mutual funds, consider the following factors:
- Risk Tolerance: Assess your risk tolerance as penny equity funds can be highly volatile. Ensure that the level of risk aligns with your investment preferences.
- Fund Manager’s Expertise: Evaluate the experience and track record of the fund manager. A skilled manager can navigate the challenges of penny stocks in India for long term investments more effectively.
- Diversification: Check the fund’s diversification strategy. Diversified portfolios can mitigate risks tied to individual penny shares in India options.
- Performance History: Review the fund’s historical performance, keeping in mind that past performance does not guarantee results in thew future of penny stocks held by mutual funds. Consistent returns and adherence to the investment strategy are key for small-cap mutual funds.
- Fees and Expenses: Understand the fund’s fee structure, including expense ratios and any additional charges. Lower expenses can contribute to higher returns over time.
- Investment Goals: Define your goals. Whether you’re seeking the best penny stocks with high returns or stable growth, choose the top penny stock mutual funds that align with your timeline and objectives.
- Liquidity: Assess the liquidity of the fund’s underlying assets. Liquidity issues can impact the ability to buy or sell shares at desired prices.
Risks Involved While Investing in Penny Stocks Mutual Funds
Investing in the top penny stock mutual funds can be quite challenging. Here are a few risks you should be aware about:
- Liquidity Challenges: Penny stock mutual funds in India often deal with thinly traded stocks, making them difficult to buy or sell quickly.
- Price Manipulation: Even the fundamentally strong penny stocks are sometimes prone to price manipulation, increasing investment risks.
- Fraud Potential: Some penny shares in India lack regulatory oversight, making them susceptible to fraudulent schemes.
- Limited Transparency: Even the top-performing penny stocks can sometimes lack analyst coverage or detailed financial reports, reducing access to reliable information.
- High Volatility: The top 10 mutual funds in India investing in the best performing penny stocks can experience extreme price fluctuations, posing significant risks.
Benefits of Investing in Penny Stocks in Mutual Funds
Despite the associated risks, opting for the top penny stock mutual funds can offer investors the opportunity for substantial returns.
- High Growth Potential: Penny stock mutual funds in India offer investors the opportunity for rapid growth through exposure to undervalued penny stocks in India for long term.
- Professional Management: Fund managers leverage expertise to identify the best penny stocks with high returns, helping investors maximise potential gains.
- Diversification: Investing in multiple penny shares in India through mutual funds reduces risks compared to buying individual stocks.
- Accessibility: High-return penny mutual funds can provide a structured and managed approach to investing in penny stocks.
- Portfolio Growth: For those aiming to diversify, penny stock mutual funds in India can complement existing investments, balancing risk and reward.
To Wrap It Up…
Investing in the top penny stock mutual funds in India presents a high-risk, high-reward option. Despite the potential for substantial returns, investors should be mindful of the inherent risks. Thorough research and due diligence are imperative before venturing into penny stock mutual funds. Like any investment, seeking guidance from a financial advisor is essential to ascertain alignment with your investment goals and risk tolerance.
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Frequently Asked Questions(FAQs) on Top Penny Stock Mutual Funds
Due to high volatility and inherent risks, small-cap penny stocks bought by mutual funds can be suitable for short-term, speculative plays, not long-term holds. However, it ultimately comes down to the investor’s risk tolerance and investment objective and the investment time can vary as these are subject to changes.
The penny stocks holding by mutual funds typically invest in stocks with low market prices, often below Rs. 5 per share. These funds may target small and speculative companies, aiming for potentially high returns but also presenting higher risks.
Yes, penny stock mutual funds are regulated by the Securities and Exchange Board of India (SEBI). SEBI categorises mutual funds based on their investment mandate, specifying the minimum and maximum percentage they can invest in different asset classes like large-cap, mid-cap, and small-cap stocks.
Returns on the top penny stock mutual funds vary widely. They can provide high returns, but the volatility of penny stocks for beginners entails higher risks. Past performance doesn’t guarantee future results. However, it’s important to do your own research and/or consult a financial advisor before investing.
Although there is no timeline as it depends on the risk appetite of the investor. However, you can consider exploring penny stock opportunities in mutual funds if you have a high-risk tolerance, seek potential high returns, and can withstand the volatility associated with these stocks. Investors should comprehend both the growth potential and the challenges confronted by agricultural companies.
