Best Small-Cap Mutual Funds in 2026: Returns, Risk and Comparison

Small-cap mutual funds offer exposure to smaller listed businesses, where growth opportunities can be accompanied by sharp price swings and limited liquidity. Choosing among these schemes requires more than looking at which fund topped a short-term performance list.

Under SEBI’s February 2026 classification rules, a small-cap fund must invest at least 65% of its total assets in equity and equity-related instruments of small-cap companies. The rest of the portfolio can vary within applicable investment rules, creating meaningful differences between schemes.

A comparison of six established small-cap schemes shows substantial variation in their three-year and five-year results. The data below refer exclusively to Direct Plan – Growth returns, so investors can compare like with like. These historical returns are not recommendations or forecasts.

Six Small-Cap Funds: AUM, 3-Year and 5-Year Returns (Regular – Growth)

1. What the Six-Fund Comparison Shows

Bandhan Small Cap Fund had the highest three-year return among these six funds at 21.10%. Invesco India Small Cap followed at 19.09%, while Quant recorded 15.69%. In the five-year comparison, Quant stood marginally ahead at 16.53%, followed by Invesco at 16.47% and Bandhan at 16.33%. Small differences in historical returns do not necessarily indicate a meaningful difference in future prospects.

2. Nippon, SBI and HDFC: Different Return Profiles

Nippon India Small Cap Fund showed a three-year return of 13.25% and a five-year return of 16.08%. SBI Small Cap Fund reported 10.00% and 11.26%, while HDFC Small Cap Fund returned 8.53% and 12.01%. This divergence reinforces why investors should look beyond a single time horizon when assessing performance.

3. Quant Small Cap: Stronger Five-Year Than Three-Year Showing

Quant Small Cap Fund recorded a three-year return of 15.69% and a five-year return of 16.53% on Advisorkhoj’s Regular – Growth page. The five-year figure is higher than its three-year figure, indicating that outcomes varied across periods. A fund’s strategy, drawdown profile and exposure to different types of small-cap businesses should also be reviewed.

4. AUM, Liquidity and Concentration Need Separate Checks

The AUM figures range from ₹16,130.64 crore for Invesco India Small Cap Fund to ₹80,905.55 crore for Nippon India Small Cap Fund, as of 30 September 2026. SBI recorded ₹41,059.17 crore, HDFC ₹40,800.81 crore, Bandhan ₹35,759.13 crore and Quant ₹35,391.32 crore. AUM alone cannot establish superior liquidity or stock-picking ability; the liquidity of portfolio holdings also matters.

5. Why Expense Ratios and Benchmarks Still Matter

Expense ratios and benchmark comparisons remain relevant even though they are not included in the requested four-column table. The trailing returns shown are for Regular Plans, which generally have higher expenses than Direct Plans. Comparing a fund against its appropriate total-return benchmark, alongside rolling returns and downside risk, provides additional perspective.

6. How Should Investors Use This Comparison?

Begin with the three-year and five-year performance figures, then study risk-adjusted and rolling returns, portfolio concentration, fund-manager consistency and liquidity. The six schemes have different styles and asset bases. Historical leadership can change, particularly during corrections in small-cap equities.

Conclusion

On the Advisorkhoj Regular – Growth figures reviewed, Bandhan led this selected group over three years, while Quant was marginally ahead over five years. Nippon had the largest AUM as of September 2026. The ranking is based only on the six schemes and the limited metrics shown; past returns neither guarantee future performance nor establish which fund is most suitable for an individual investor.