Top Performing Small Cap Funds
Ranked by 3-Year CAGR performance across Direct Growth plans from verified AMC filings.
| Scheme Name & AMC | Rating | AUM (₹ Cr) | 1Y Return | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|---|
Bandhan Small Cap Fund Bandhan Mutual Fund | 5 | ₹35,856 | +9.98% | +22.69% | +17.94% |
ITI Small Cap Fund ITI Mutual Fund | 4 | ₹3,666 | +16.07% | +21.93% | +16.75% |
Invesco India Smallcap Fund Invesco Mutual Fund Pvt | 5 | ₹16,131 | +9.02% | +20.52% | +17.59% |
Bank of India Small Cap Fund Bank of India Investment Managers | 3 | ₹3,671 | +27.08% | +20.37% | +18.31% |
Mahindra Manulife Small Cap Fund Mahindra Manulife Investment Management | 4 | ₹5,468 | +13.34% | +18.44% | +0.00% |
Quant Small Cap Fund Quant Money Managers | 4 | ₹35,572 | +11.09% | +16.60% | +17.16% |
LIC MF Small Cap Fund LIC Mutual Fund Mutual Fund | 2 | ₹832 | +13.21% | +16.41% | +15.63% |
DSP Small Cap Fund DSP Investment Managers | — | ₹21,467 | +17.27% | +16.22% | +16.10% |
Union Small Cap Fund Union Mutual Fund | 3 | ₹2,732 | +17.86% | +15.22% | +15.54% |
Sundaram Small Cap Fund Sundaram Mutual Fund | 3 | ₹4,107 | +10.23% | +14.93% | +14.40% |
PGIM India Small Cap Fund PGIM India Mutual Fund | 1 | ₹1,739 | +8.85% | +14.81% | +11.06% |
Aditya Birla SL Small Cap Fund Aditya Birla Sun Life Mutual Fund | — | ₹6,120 | +13.68% | +13.93% | +11.62% |
Axis Small Cap Fund Axis Mutual Fund | 4 | ₹30,678 | +6.45% | +13.87% | +14.17% |
Edelweiss Small Cap Fund Edelweiss Mutual Fund | 4 | ₹7,000 | +5.11% | +13.74% | +14.59% |
Nippon India Small Cap Fund Nippon Life India Mutual Fund | 4 | ₹80,906 | +6.32% | +13.69% | +16.76% |
SEBI Mandate & Category Classification
SEBI dictates that Small Cap funds invest at least 65% of their total assets in companies ranked 251st and beyond in market capitalization. These companies represent emerging micro-caps, specialized niche players, and rapidly growing enterprises across diverse sectors.
Category Highlights
- Access to high-growth niche sectors not available in Nifty 50
- Exceptional multi-bagger upside over full 10-year market cycles
- Requires strict disciplined SIP and long holding horizon
Taxation Rules (Post-Budget 2024)
Equity Taxation (Budget 2024): LTCG taxed at 12.5% for holding > 12 months over ₹1.25L exemption. STCG taxed at 20% for holding ≤ 12 months.
Who Should Invest?
- •Investors with very high risk tolerance and patience to withstand 30%+ interim drawdowns.
- •Long-term goals 7-10+ years away such as children’s higher education or retirement corpus creation.
- •Disciplined monthly SIP investors capitalizing on market volatility.
Risks to Consider
- •Severe liquidity risk: small-cap stocks can be difficult to exit quickly during bear markets.
- •Extended cyclical bear periods lasting 2-3 years where small caps underperform broader indices.
What if you invest ₹10,000/month in Small Cap Funds?
Projected wealth growth assuming a category benchmark CAGR of 16.5% compounded monthly:
Explore Other Mutual Fund Categories
Compare asset classes, risk-return profiles, and SEBI regulations across all fund categories in India.
Frequently Asked Questions: Small Cap Funds
What constitutes a Small Cap stock under SEBI rules?
Any listed company ranked 251st and below by full market capitalization is classified as a small cap. Small Cap funds must allocate a minimum of 65% of their assets into these companies.
Can Small Cap funds lose money in the short term?
Yes, in bear markets or market corrections, small-cap funds can experience 20% to 40% declines. This is why a minimum time horizon of 7 to 10 years is critical.
How do fund managers handle liquidity in Small Cap funds?
Experienced fund managers maintain a 5-15% cash/large-cap buffer, avoid illiquid micro-caps, and cap maximum inflows when valuations become overheated.
What returns can I realistically expect from Small Cap funds?
Historically, well-managed Indian small-cap funds have compounded between 15% and 18% CAGR over 7-10 year periods, though past returns do not guarantee future performance.