Delivering Returns with Resilience: SBI Multicap Fund's proven multicap strategy

Multicap funds invest in all three market capitalization segments. According to SEBI's mandates Multicap funds must invest minimum 25% of their assets in each of the three market cap segments i.e. minimum 25% in large cap (top 100 stocks by market cap), minimum 25% in midcap (101^st to 250^th stocks by market cap and minimum 25% in small cap (251^st and lower by market cap).

At any point of time multicap funds will have minimum 50% exposure to midcap and small cap stocks. While multicap funds may have higher volatility compared to some other diversified equity fund categories, they offer superior wealth creation potential in the long term for investors with a very high-risk appetite. In this article, we will discuss about SBI Multicap Fund.

Why invest in multicap?

• Historical data shows that multicap strategy has created more wealth compared to popular broad market indices. The chart below shows the growth of Rs 10,000 in Nifty 50 TRI, Nifty 500 TRI, and Nifty500 Multicap 50:25:25 TRI since the inception of the multicap index. You can see that the multicap index created more wealth compared to the two broad market indices over the last 20 years or so.
  
  

  

  Source: NSE, Advisorkhoj Research, as of 31^st July 2025



• Multicap strategy has the potential of giving superior returns across market conditions for long investment tenures compared to the popular broad market indices. The chart below shows the average, median, maximum, and minimum for 1-, 3- and 5-year investment tenures since the inception of the multicap index (more than 20 years back) versus the popular broad market indices.
  
  

  

  Source: NSE, Advisorkhoj Research, as of 26^th August 2025. All indices are total return indices (TRI)

  
  

  You can see that multicap index gave higher average, median and maximum rolling returns for most investment tenures across different market conditions.



• Multicap strategy not only has the potential of giving superior returns; it can also offer superior risk return trade off across long investment tenures. The table below shows the rolling returns distribution of multicap index versus the popular broad market indices for 1-, 3- and 5-year investment tenures since the inception of the multicap index.
  
  

  

  Source: NSE, Advisorkhoj Research, as of 26^th August 2025. All indices are total return indices (TRI)

  
  

  You can see that the percentage of instances (observations) of 15%+ CAGR returns (shaded in blue in the table) given by multicap index (marked in dark green) is higher than the broad market indices for all three investment tenures. Furthermore, over 5-year investment tenures, while the percentage of instances of negative returns (marked in dark red) is the same for Nifty 500 and the multicap index, the percentage of instances of 15%+ CAGR returns is significantly higher. In other words, over long investment tenures, multicap offers superior risk / return trade-off.

  By offering exposure to a wide range of sectors, including those under-represented in traditional indices, multicap funds allow investors to tap into the full potential of India's growth story. (see the table below)

  
  

  

  Source: NSE, as of 31^st July 2025

Is this a suitable time to invest in multicap funds?

The deep correction has brought valuations from their peak to more moderate levels. Multicap fund managers may find attractive long term investment opportunities at current valuations. While steep tariffs may impact some export-oriented companies, the proposed GST rationalization is likely to benefit many companies especially in the mid and small cap segments. Furthermore, the long-term India growth story is intact even in the rapidly shifting geopolitical dynamics. India remains the fastest growing emerging market economy and is expected to become the third largest economy by 2030. The India growth story will play out across all three market cap segments.

Source: NSE, as of 26^th Aug 2025

About SBI Multicap Fund

The fund is around 3.5 years old and has given around 16% CAGR returns since inception. The chart below shows the growth of Rs 10,000 investment in SBI Multicap Fund since the inception of the fund.

Source: NSE, as of 26^th Jun 2025

Lower Drawdowns

The chart below shows the drawdown of the SBI Multicap Fund versus the benchmark index over the last 1 year. You can see that, in this volatile period, the fund was able to limit downside risks for the investors. The maximum drawdown of the fund in this drawdown was negative 15%, while that of the benchmark index was negative 20%.

Source: NSE, as of 26^th Jun 2025

Has started outperforming the benchmark

The chart below shows the monthly rolling returns of the SBI Multicap Fund versus the benchmark index over the last 1 year. You can see that the fund not only provided downside risk limitation relative to the benchmark but also outperformed the benchmark in market recoveries.

Source: Advisorkhoj Research, as of 26^th Jun 2025

Has started outperforming the peer average

The chart below shows the 1 year rolling returns of SBI Multicap Fund versus the multicap fund category average since the inception of the fund. You can see that after a period of underperformance, the fund has started to outperform the category average over the last year or so.

Source: Advisorkhoj Research, as of 26^th Jun 2025

Strong risk adjusted returns in last 1 year

A closer look at the market capture ratios of the SBI Multicap Fund tells the story of delivering strong risk adjusted returns in the last one year. Up Market Capture Ratio tells us how much percentage of the market's (benchmark index) upside was captured by the fund, while Down Market Capture Ratio tells us how much percentage of the market's (benchmark index) downside was arrested by the fund. Up-Market Capture Ratio and Down-Market Capture ratio can give us a sense of risk adjusted returns.

The Up Market Capture Ratio of SBI Multicap Fund was 95% which implies that if the benchmark index went up by 1% in a month, then the scheme's Net Asset Value (NAV) went up by 0.95%. The fund delivered nearly same returns as the benchmark in up market with less risk as evidenced in the Down Market Capture Ratio of the fund which was only 68% which implies that if the benchmark index went down by 1% in a month, then the scheme's Net Asset Value (NAV) also fell by 0.68% only.

Current portfolio positioning

Source: SBI MF Fund Factsheet, as of 31^st July 2025

Who can invest in SBI Multicap Fund?

• Investors looking for capital appreciation or wealth creation over long investment horizon.


• Investors with very high-risk appetites.


• Investors with minimum 5-year investment horizon.


• Investors who want to invest from their monthly savings through SIP.


• Investors who are worried about short term volatility can invest in the fund through 3-to-6-month STP from SBI Overnight Fund or SBI Liquid Fund or any other low volatility SBI MF debt scheme.

Investors are advised to consult their financial advisors or mutual fund distributors to assess the suitability of SBI Multicap Fund as a key component of their investment portfolio.