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Best Small Cap Mutual Funds

Small cap mutual funds invest in small cap companies (the ones that have a market capitalization of less than Rs. 5,000 crores). They are the funds that predominantly invest in small cap stocks, with a very minute portion invested in higher market categories. However, they tend to outperform large or mid-cap funds but are known to be much more riskier in comparison.

To understand small cap mutual funds better, you can have a look at some of the best small cap mutual funds to invest in 2025.

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List of Small Cap Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Bandhan Small Cap Fund
EquityVery High13.4%5₹12,981
Invesco India Smallcap Fund
EquityVery High12.3%5₹7,424
Nippon India Small Cap Fund
EquityVery High0.2%5₹66,601
Quant Small Cap Fund
EquityVery High-3.0%4₹29,629
Franklin India Small Cap Fund
EquityVery High-1.2%4₹13,995
Franklin India Smaller Companies Fund
EquityVery High-2.6%4₹13,544
Tata Small Cap Fund
EquityVery High5.7%4₹11,163
Edelweiss Small Cap Fund
EquityVery High5.9%4₹4,929
ITI Small Cap Fund
EquityVery High4.7%3₹2,640
HDFC Small Cap Fund
EquityVery High5.4%3₹35,780
Bank of India Small Cap Fund
EquityVery High4.4%3₹1,907
HSBC Small Cap Fund
EquityVery High-0.5%3₹16,909
Sundaram Small Cap Fund
EquityVery High6.7%3₹3,438
Axis Small Cap Fund
EquityVery High8.4%3₹26,379
UTI Small Cap Fund
EquityVery High7.7%3₹4,844
View All

Who Should Invest in Small Cap Mutual Funds?

While searching for the best small cap mutual funds 2025, consider if you are-

  1. Investor Who Wants to Diversify

It is suitable for investors who are already in the investing market and looking for more ways to diversify their investments. Given that small cap funds can be risky in nature, it ensures that your investments are spread across various other forms of investments and not small cap funds alone.

  1. High-Risk Appetite Investor/Aggressive Investor

These investments are much more riskier than mid or large-cap funds, given that they invest in smaller company stocks that are yet to experience growth. Therefore, it can suit the investors who are willing to take the risk or have the risk appetite to face sudden lows of the fund. 

  1. Long Term Investor

Small cap funds can see sudden fluctuations in the short term, but they are known to perform well over the long term. This enables them to be the most suitable investors who can stay invested in the funds for the long term.

If you are investing lumpsum in mutual funds and looking forward to estimating your returns, simply use lumpsum calculator. It is a convenient tool that can assist you in generating your prospective returns.

Factors to Consider Before Investing in Small Cap Mutual Funds

The factors to consider before beginning to invest in top small cap funds are:

Risk Factor: Small cap mutual funds are highly volatile in nature when compared to mid or large cap mutual funds. Moreover, the net asset value of small cap mutual funds fluctuates on a broad range.

Investor Expertise: Small cap mutual funds can deliver high performance on a combination of good strategy and observation. But, these funds are known to be highly volatile. Therefore, it is advisable to investors with good mutual fund investment expertise. 

Investment Term: These types of mutual funds are most suitable for investors with a long investment time horizon. It is mostly not suitable for investors with a short investment tenure. 

Major Advantages

Here are some of the benefits of investing in the best small-cap mutual funds:

  • High growth potential: These funds possess immense growth potential. It’s because small-cap companies have an aggressive expansion strategy that can boost their growth significantly, especially over the long term. 
  • Ability to outperform other equity funds: In case the large-cap and mid-cap funds are not delivering returns per expectations, small-cap mutual funds can be a suitable portfolio inclusion. These tend to offer better gains, thus, balancing your portfolio. 
  • Researched diversification: The best small-cap mutual funds usually invest in stocks of companies with massive potential to generate returns. Fund managers conduct extensive research to analyse the top-performing stocks and invest accordingly. It lets investors diversify their portfolio but with calculated risk. 

Investment route: Investors can allocate their savings to small-cap funds via two ways: lump sum and Systematic Investment Plan (SIP).  By opting for the first option, individuals can invest the total amount they want to invest in at one go. Nevertheless, please note that one may have to invest a minimum of Rs.1,000 in this case. On the contrary, SIP allows investors to allocate their funds to a mutual fund scheme at fixed intervals (monthly, quarterly, etc.). The instalment amount can be as low as Rs.100 in this regard.

Risks Involved While Investing in Small Cap Mutual Funds

While finding the best small cap funds, have a look at the major risks associated-

High Volatility: One of the biggest risks connected with small cap funds is that their prices might fluctuate dramatically. This makes them extremely unstable to invest in because the losses can be substantial if the price does not move in accordance with your expectations. 

Risky Performance: The performance of small cap funds is determined by a number of factors, including stock selection, stock performance, and timely intervention by the fund manager to balance the fund. Since there are so many variables at play, the performance of small cap funds may not be as impressive as one might think. 

Low Liquidity: Small cap mutual funds are rarely invested in by institutional investors. Even among retail investors, though, engagement is typically low. This can cause liquidity concerns and make it more difficult to buy or sell units in the market.

FAQ

Q1. Are small cap funds good for new investors?

Small cap funds are known to have sudden highs, and provide rewarding returns. But, they are also known to be extremely volatile in nature, especially when compared to mid cap and large cap funds. Therefore, investors with more expertise can consider investing in these funds. 

Q2. What type of returns can be earned from small cap funds?

Small Cap Funds deliver stable returns in the long run because, in the short span of duration, they may encounter market fluctuation, resulting in volatile results.

Q3. Is it risky to invest in small cap funds?

It is risky and volatile to invest in small cap funds in the short term, it is when they could encounter major fluctuations. Apart from that, small cap funds can give you rewarding returns in the long run. 

Q4. Are small cap funds suitable for short term investment?

Small cap funds are known to give you high returns in the long term, and perform well over a time period. 

Q5. Who are small cap funds most suitable for?

Small cap funds can be the most suitable for investors with expertise in mutual fund investments. 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Let's have a closer look

Now let us jump and check about these top 15 mutual fund schemes.

Bandhan Small Cap Fund Direct Growth

Fund Performance: The Bandhan Small Cap Fund has given 36.5% annualized returns in the past three years and 38.39% in the last 5 years. The Bandhan Small Cap Fund comes under the Equity category of IDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Bandhan Small Cap Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹12,981Cr
1Y Returns13.4%

Invesco India Smallcap Fund Direct Growth

Fund Performance: The Invesco India Smallcap Fund has given 32.61% annualized returns in the past three years and 35.75% in the last 5 years. The Invesco India Smallcap Fund comes under the Equity category of Invesco Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Invesco India Smallcap Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹7,424Cr
1Y Returns12.3%

Nippon India Small Cap Fund Direct Growth

Fund Performance: The Nippon India Small Cap Fund has given 30.38% annualized returns in the past three years and 38.7% in the last 5 years. The Nippon India Small Cap Fund comes under the Equity category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹100.

Min Investment Amt₹5,000
AUM₹66,601Cr
1Y Returns0.2%

Quant Small Cap Fund Direct Plan Growth

Fund Performance: The Quant Small Cap Fund has given 32% annualized returns in the past three years and 44.59% in the last 5 years. The Quant Small Cap Fund comes under the Equity category of Quant Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Quant Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹29,629Cr
1Y Returns-3.0%

Franklin India Small Cap Fund Direct Growth

Fund Performance: The Franklin India Small Cap Fund has given 30.25% annualized returns in the past three years and 35.75% in the last 5 years. The Franklin India Small Cap Fund comes under the Equity category of Franklin Templeton Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Franklin India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹13,995Cr
1Y Returns-1.2%

Franklin India Smaller Companies Fund Direct Growth

Fund Performance: The Franklin India Smaller Companies Fund has given 29.9% annualized returns in the past three years and 35.24% in the last 5 years. The Franklin India Smaller Companies Fund comes under the Equity category of Franklin Templeton Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Franklin India Smaller Companies Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹13,544Cr
1Y Returns-2.6%

Tata Small Cap Fund Direct Growth

Fund Performance: The Tata Small Cap Fund has given 29.43% annualized returns in the past three years and 36.1% in the last 5 years. The Tata Small Cap Fund comes under the Equity category of Tata Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Tata Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹100.

Min Investment Amt₹5,000
AUM₹11,163Cr
1Y Returns5.7%

Edelweiss Small Cap Fund Direct Growth

Fund Performance: The Edelweiss Small Cap Fund has given 28.05% annualized returns in the past three years and 36.28% in the last 5 years. The Edelweiss Small Cap Fund comes under the Equity category of Edelweiss Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Edelweiss Small Cap Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹4,929Cr
1Y Returns5.9%

ITI Small Cap Fund Direct Growth

Fund Performance: The ITI Small Cap Fund has given 34.4% annualized returns in the past three years and 30.72% in the last 5 years. The ITI Small Cap Fund comes under the Equity category of ITI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ITI Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹2,640Cr
1Y Returns4.7%

HDFC Small Cap Fund Direct Growth

Fund Performance: The HDFC Small Cap Fund has given 29.4% annualized returns in the past three years and 35.44% in the last 5 years. The HDFC Small Cap Fund comes under the Equity category of HDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HDFC Small Cap Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹35,780Cr
1Y Returns5.4%

Bank of India Small Cap Fund Direct Growth

Fund Performance: The Bank of India Small Cap Fund has given 28.57% annualized returns in the past three years and 36.82% in the last 5 years. The Bank of India Small Cap Fund comes under the Equity category of Bank of India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Bank of India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹1,907Cr
1Y Returns4.4%

HSBC Small Cap Fund Direct Growth

Fund Performance: The HSBC Small Cap Fund has given 27.64% annualized returns in the past three years and 36.62% in the last 5 years. The HSBC Small Cap Fund comes under the Equity category of HSBC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HSBC Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹16,909Cr
1Y Returns-0.5%

Sundaram Small Cap Fund Direct Growth

Fund Performance: The Sundaram Small Cap Fund has given 27.5% annualized returns in the past three years and 34.26% in the last 5 years. The Sundaram Small Cap Fund comes under the Equity category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Small Cap Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹3,438Cr
1Y Returns6.7%

Axis Small Cap Fund Direct Growth

Fund Performance: The Axis Small Cap Fund has given 25.64% annualized returns in the past three years and 32.53% in the last 5 years. The Axis Small Cap Fund comes under the Equity category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Small Cap Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹26,379Cr
1Y Returns8.4%

UTI Small Cap Fund Direct Growth

Fund Performance: The UTI Small Cap Fund comes under the Equity category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹4,844Cr
1Y Returns7.7%

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