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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 are indexed descending on market capitalisation. Small-cap funds have to invest at least 65% of their corpus in small cap stocks. View More

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.

Best Small Cap Mutual Funds

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Search Result - 38 Mutual Funds

Who Should Invest in Small Cap Mutual Funds?

Small caps can even double or triple in value over the long run in a bull market, so they are a great addition to your portfolio in spite of posing a significant amount of risk. Hence, these funds are perfect for investors who have an appetite for risk. These funds tend to outperform large cap funds in the long run provided you buy them early in a bull market. However, in a bear market, the mid and large cap funds outperform the small caps View More

It is best to invest in small caps for a period of 5-7 years because in a bear market small caps perform poorly. These funds are ideal for investors who have a long investment horizon. You should have some long term goals in mind while investing in small caps. You can plan for your retirement, your children’s education or buying a retirement home when investing in these funds for the long term
These funds work well for investors who want a diversified portfolio by holding small cap, mid cap and large cap funds. In a bull market these funds outperform large caps, while in a bear market investment in large caps can help improve the performance of the portfolio since small caps underperform in a bear market
If you are a patient investor, a small cap fund is perfect for you. Never panic and sell or buy in a hurry. You need to be patient to book profits when you buy a small cap fund. Don’t try to time the market

Features of Small Cap Mutual Funds

Small caps invest in young companies that are not very diversified. View More

These companies generally have a single line of business and a market capitalisation less than 5000 rupees
Even though small caps are risky, they tend to outperform large cap funds in the long run and are perfect for aggressive investors. Small caps generally outperform large cap funds in a bull market, but in a bear market large caps tend to outperform small caps
Small caps invest a very small portion of their corpus in higher market capitalisation stocks since they have to invest at least 65% of their corpus in small cap stocks
Liquidity is a problem for small caps since it is difficult to find small cap stocks in in the required volume
Since there is a shortage of small cap stocks, many small caps often stop the fresh inflow of capital from investors

Factors to consider while investing in Small Cap Funds

Here is a list of factors you can consider before investing in small cap funds. View More

Investment Goals
Every individual has their own investment goals from a fund. One may be looking to invest in a fund for a single year; the other may be investing for 3 years. Small cap funds are best suited for long-term investors who are willing to stay invested for over 5 years.

Expense Ratio
When you invest in a mutual fund, such as the best small cap funds, you typically do so through an Asset Management Company (AMC). This company levies a cost on you to manage your funds that goes towards administrative expenses, legal expenses, custodial fees, fund manager’s commissions, etc. This is called the expense ratio of a small cap fund.

Past Performance of Small Cap Fund
The historical trends of a small cap fund’s performance are a good indicator of how it has fared during the ups and downs of the market. These dynamics help you understand whether or not a small cap fund will be a worthwhile investment.

Fund Manager Skills and Experience
In the end, your fund manager would make the decisions on buying and selling fund assets. Before putting your money in a small cap fund, it is best to scrutinize the fund manager’s portfolio to understand how good the person is with his market judgment.

Small Cap Fund Portfolio
Mutual funds comprise different assets belonging to various sectors and industries. Examining a fund’s portfolio helps you determine the actual worth and value of investing in it by carefully drawing observations of those assets in the market. If the performance matches your expectations, invest in the small cap fund.

Direct and Regular Plans
Investing in mutual funds through an AMC involves brokers and brokering agencies that have their own cuts and commissions, which raises the expense ratio of the small cap fund. Look for a direct plan with an AMC that does not involve any middlemen.

Taxability of Small Cap Funds

Capital gains refer to the amount of money that is earned in excess of the investment when you redeem a small cap equity fund. Capital gains View More

depend on how long the money was invested in the small cap fund. The number of years for which you invested your money in small caps is called the holding period.
If the holding period is up to one year then the short term capital gains are taxed at 15%. In case the holding period is greater than 1 year, then the gains are called long term capital gains. The long term capital gains of over one lakh are taxed at 10%.

Risk Involved With Small Cap Funds

It is best to invest in small cap mutual funds through a systematic investment plan to reduce volatility since these funds are risky. A systematic investment plan is one wherein you invest a small amount of money periodically at predefined intervals in the small cap fund View More

instead of a lump sum amount of money in one go. This is to ensure that you benefit in the long run regardless of the market dynamics. The compounding effect of your investments ensure that you earn not only on the principal amount but also on the gains on the principal
Small Caps perform poorly in a bear market so the consistency of the funds and the downside risk should be taken into account while forecasting the performance of the funds. The consistency of a fund is measured by the Hurst exponent. The downside risk is the estimation of the fund’s loss in value if market conditions cause a decline in the security prices
Small caps carry a higher expense ratio than large cap funds so your net small cap fund return post expenses may be lower than what you expect. Although an expense ratio with an upper limit of 1.5% is preferred, small caps typically have a an average expense ratio that is higher. This is because small cap mutual funds have to conduct primary research and have many analysts contribute to the research. The reason for this is that small cap stock research is not as easily accessible as large cap stock research. The best small cap funds are the ones with an expense ratio of less than 1.5%.

Advantages of Small Cap Funds

High Returns In a Bull Market
These funds invest in companies that have high-risk high-return potential. The small cap fund returns are generally high in a bull market, but it is important to look at the track record of the small caps before investing in them. The returns over a five year period should be studied to understand the performance of the best small caps.

Help to Diversify Your Portfolio
Small caps help to diversify your portfolio. Funds can be shortlisted after taking into account their mean rolling returns rolled daily for the last three years. Rolling returns are the annualised average returns for a period ending with the listed year. These returns can examine the behaviour of small caps for the holding period. The rolling returns give the performance of the fund smoothened over several periods throughout its history.

The small cap category has offered a return of 37.79% in the last year. Investors believe that the small cap category may repeat its performance in 2022. Remember small caps are a risky investment and you should not try to time the market. The best practice is to simply invest in small caps for the long term.

Popular Small Cap Mutual Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

Quant Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 07-01-13 and is currently under the management of our experienced fund manager Sanjeev Sharma. With an impressive AUM of ₹17,348 Crores, this scheme's latest NAV is ₹265.9012 as of 23-04-24.

Quant Small Cap Fund – Direct Growth scheme has delivered a return performance of 74.9% in the last 1 year, 41.6% in the last 3 years, and an 19.9% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹17,348
  • 3Y Return
  • 74.9%

Bank of India Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 19-12-18 and is currently under the management of our experienced fund manager Dhruv Bhatia. With an impressive AUM of ₹939 Crores, this scheme's latest NAV is ₹44.7 as of 23-04-24.

Bank of India Small Cap Fund – Direct Growth scheme has delivered a return performance of 57.3% in the last 1 year, 31.7% in the last 3 years, and an 32.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹939
  • 3Y Return
  • 57.3%

Canara Robeco Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 15-02-19 and is currently under the management of our experienced fund manager Shridatta Bhandwaldar. With an impressive AUM of ₹9,402 Crores, this scheme's latest NAV is ₹37.56 as of 23-04-24.

Canara Robeco Small Cap Fund – Direct Growth scheme has delivered a return performance of 45.8% in the last 1 year, 32.4% in the last 3 years, and an 29% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹9,402
  • 3Y Return
  • 45.8%

Kotak Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Pankaj Tibrewal. With an impressive AUM of ₹13,881 Crores, this scheme's latest NAV is ₹266.47 as of 24-04-24.

Kotak Small Cap Fund – Direct Growth scheme has delivered a return performance of 43% in the last 1 year, 26.1% in the last 3 years, and an 21.1% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹13,881
  • 3Y Return
  • 43%

Edelweiss Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 07-02-19 and is currently under the management of our experienced fund manager Sahil Shah. With an impressive AUM of ₹3,134 Crores, this scheme's latest NAV is ₹41.252 as of 23-04-24.

Edelweiss Small Cap Fund – Direct Growth scheme has delivered a return performance of 53.2% in the last 1 year, 31.9% in the last 3 years, and an 31.3% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹3,134
  • 3Y Return
  • 53.2%

Nippon India Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Samir Rachh. With an impressive AUM of ₹45,749 Crores, this scheme's latest NAV is ₹166.4741 as of 23-04-24.

Nippon India Small Cap Fund – Direct Growth scheme has delivered a return performance of 60.9% in the last 1 year, 36.9% in the last 3 years, and an 27.1% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹45,749
  • 3Y Return
  • 60.9%

Nippon India Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Samir Rachh. With an impressive AUM of ₹45,749 Crores, this scheme's latest NAV is ₹166.4741 as of 23-04-24.

Nippon India Small Cap Fund – Direct Growth scheme has delivered a return performance of 60.9% in the last 1 year, 36.9% in the last 3 years, and an 27.1% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹45,749
  • 3Y Return
  • 60.9%

Union Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 17-06-14 and is currently under the management of our experienced fund manager Hardick Bora. With an impressive AUM of ₹1,294 Crores, this scheme's latest NAV is ₹46.41 as of 23-04-24.

Union Small Cap Fund – Direct Growth scheme has delivered a return performance of 47.7% in the last 1 year, 27% in the last 3 years, and an 16.8% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹1,294
  • 3Y Return
  • 47.7%

SBI Small Cap Fund – Direct Growth is an Small Cap scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager R Srinivasan. With an impressive AUM of ₹25,434 Crores, this scheme's latest NAV is ₹178.2084 as of 23-04-24.

SBI Small Cap Fund – Direct Growth scheme has delivered a return performance of 42.3% in the last 1 year, 26.5% in the last 3 years, and an 26.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹25,434
  • 3Y Return
  • 42.3%

Sundaram Emerging Small Cap Series VII – Dir Growth is an Small Cap scheme that was launched on 28-09-18 and is currently under the management of our experienced fund manager Rohit Seksaria. With an impressive AUM of ₹159 Crores, this scheme's latest NAV is ₹25.4074 as of 29-09-23.

Sundaram Emerging Small Cap Series VII – Dir Growth scheme has delivered a return performance of 63.9% in the last 1 year, 29% in the last 3 years, and an - since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Small Cap funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹159
  • 3Y Return
  • 63.9%

Frequently Asked Questions

When should I invest in small-cap Mutual funds?

If you are looking for higher returns in a shorter period, you should invest in small-cap funds. Small-cap funds usually invest in the stocks of smaller companies that respond severely to market dynamics. As a result, these funds are high-risk. In the shorter term, the volatility may cause you to sustain losses in small-cap; however, if the fund performs well, the returns are exponential.

Are there any disadvantages for small-cap Mutual funds?

Yes. Small-cap funds have low liquidity, making them unsuitable for investing in if you intend to improve your liquidity through investment. Additionally, small-cap funds are highly volatile and may cause you to sustain high losses if the market underperforms. It is best to carefully select the small-cap fund you wish to invest in and plan your investment in it.

How do I invest in small-cap Mutual funds?

You can begin investing in small cap funds online through websites like 5Paisa. These websites provide you with the right market analytics and information that helps you judge fund performance yourself and take a call for your investment. They also help with predictions that help you plan your investments better.

You can also invest in the stock of small-cap companies by creating a Demat account; however, this method is riskier.

Should I include small-cap funds in my investment portfolio?

Experts believe that while small-cap funds are high-risk investments, you can invest in a few good small-cap funds for the long term instead of the short term. Long-term small cap funds can potentially outperform large and mid-cap funds, enabling you to get better returns and absorb market risks that tend to be highly effective to small cap.

How much is the ideal investment in a small cap Mutual fund?

On a long-term horizon, small-cap funds can perform better than other caps and give you great returns. With that said, on a 10-year timeline, you can dedicate 10% to 20% of your portfolio to small-cap funds, keeping the losses under control should the market become bearish.

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