Small Cap Mutual Funds

Small cap equity mutual funds invest in companies that rank below 250 in terms of market capitalisation. Since 2018, all stocks in this index according to their market capitalisation. Small-cap funds have to invest at least 65% of their corpus in Small Cap stocks.
They invest in small revenue companies that have a market capitalisation of less than 5000 crore rupees. The funds are volatile in nature, but the small revenue companies they invest in have high growth prospects in the long term. You have to bear in mind that these companies are generally not diversified and they focus on a single line of business.

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List of Small Cap Mutual Funds

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logo Bandhan Small Cap Fund - Direct Growth

11.31%

Fund Size (Cr.) - 12,982

logo ITI Small Cap Fund - Direct Growth

2.98%

Fund Size (Cr.) - 2,641

logo Invesco India Smallcap Fund - Direct Growth

9.88%

Fund Size (Cr.) - 7,425

logo Quant Small Cap Fund - Direct Growth

-4.02%

Fund Size (Cr.) - 29,629

logo Nippon India Small Cap Fund - Direct Growth

-0.93%

Fund Size (Cr.) - 66,602

logo Franklin India Small Cap Fund - Direct Growth

-3.05%

Fund Size (Cr.) - 13,995

logo HDFC Small Cap Fund - Direct Growth

4.10%

Fund Size (Cr.) - 35,781

logo Tata Small Cap Fund - Direct Growth

3.14%

Fund Size (Cr.) - 11,164

logo Bank of India Small Cap Fund - Direct Growth

1.83%

Fund Size (Cr.) - 1,908

logo Edelweiss Small Cap Fund - Direct Growth

4.60%

Fund Size (Cr.) - 4,930

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Why Invest in Small Cap Mutual Funds?

Small-Cap Mutual Funds can be a suitable option for you if you want to diversify your holdings, take on greater risk, and look into long-term financial potential. Consult your financial advisor before making an investment, though, and carefully consider your risk tolerance, the fund's investment strategy, and historical statistics.

  1. 1. Significant Growth Potential: Funding for the development of companies with promising prospects for expansion and diversification.
  2. 2. Undervalued Assets: As small businesses expand, investing in them at a lesser cost may result in long-term gains because of undervaluation.
  3. 3. Mergers and Acquisitions (M&A): When small businesses combine with larger ones, they may benefit from the substantial M&A opportunities they present.

 

Popular Small Cap Mutual Funds

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 12,982
  • 3Y Return
  • 35.37%

  • Min SIP Investment Amt
  • ₹ ₹ 500
  • AUM (Cr.)
  • ₹ 2,641
  • 3Y Return
  • 33.47%

  • Min SIP Investment Amt
  • ₹ ₹ 500
  • AUM (Cr.)
  • ₹ 7,425
  • 3Y Return
  • 31.70%

  • Min SIP Investment Amt
  • ₹ ₹ 1000
  • AUM (Cr.)
  • ₹ 29,629
  • 3Y Return
  • 31.24%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 66,602
  • 3Y Return
  • 29.66%

  • Min SIP Investment Amt
  • ₹ ₹ 500
  • AUM (Cr.)
  • ₹ 13,995
  • 3Y Return
  • 29.20%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 35,781
  • 3Y Return
  • 28.61%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 11,164
  • 3Y Return
  • 28.20%

  • Min SIP Investment Amt
  • ₹ ₹ 1000
  • AUM (Cr.)
  • ₹ 1,908
  • 3Y Return
  • 27.35%

  • Min SIP Investment Amt
  • ₹ ₹ 100
  • AUM (Cr.)
  • ₹ 4,930
  • 3Y Return
  • 27.15%

FAQs

Top Small Cap funds for 2025 include Quant Small Cap Fund, Bandhan Small Cap Fund, Nippon India Small Cap Fund, Invesco India Smallcap Fund, and Tata Small Cap Fund. These funds have shown consistent long-term performance and are managed by experienced fund houses.

You must remain invested in Small Cap mutual funds for a minimum of five years because they are equity funds, meaning they invest in company stocks.

Your Small Cap allocation depends on your risk appetite and goals. Conservative investors may opt for 5–10%, while aggressive investors can consider 20–30% for long-term growth despite higher volatility.

Given that Small Cap funds are extremely volatile, investors with a long time horizon of at least five to ten years may want to consider investing in one.

Yes, Small Cap funds can offer high returns over the long term due to their growth potential. However, they are also highly volatile, so they’re better suited for investors with a high-risk appetite and a long investment horizon.

No, Small Cap funds invest in emerging, smaller companies, while blue-chip stocks belong to large, established companies. Blue chips are typically more stable, whereas Small Caps carry higher growth potential but also higher risk.

Small-cap funds can deliver strong returns over time, but not always consistently. They often experience short-term volatility, making them suitable for long-term investors who can tolerate fluctuations in performance.

Ideally, 1 to 2 well-performing Small Cap funds are sufficient for diversification without overexposure. Adding more funds doesn't necessarily reduce risk and may complicate portfolio management unnecessarily.

There are no special tax benefits exclusive to Small Cap mutual funds. They are taxed like any equity mutual fund—gains held over one year are taxed at 12.5% if exceeding ₹1.25 lakh annually.

Small-cap mutual funds are generally riskier than Mid Cap or Large Cap funds. They can be more volatile and are best suited for aggressive investors with long-term goals and a high-risk tolerance.

Choose based on consistent past performance, fund manager expertise, expense ratio, and risk-adjusted returns. Also, check portfolio diversification and whether the fund aligns with your investment goals and risk profile.
 

Compare it against its benchmark index and category average over 3–5 years. Consistent outperformance, low expense ratio, and good risk-adjusted returns indicate a well-performing Small Cap fund.

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