Best Small Cap Mutual Funds in India

25 May 2023
3 mins read
Experience the Magnificent Growth: Small Cap Funds Deliver Over 65% Returns in Just 3 Years
Best Small Cap Mutual Funds in India

What are Small Cap Mutual Funds?

Small Cap mutual fund are the funds that invest in small cap companies. Small cap companies are those companies whose market capitalization is under Rs 5000 crore. Small Cap Mutual Funds by regulation have to invest at least 65% in stocks of small cap companies along with some mid cap and large cap companies in portfolio. Despite these allocations, these funds are always small cap heavy and therefore carry the risk-reward mix associated with small cap.

List of Top 5 Best Small Cap Mutual Funds in India

Scheme Name AUM Size in Cr 3 Yr Return 5 Yr Return Expense Ratio
Quant Small Cap Fund 4092 65.98% 25.60% 0.62%
Nippon India Small Cap Fund 23910 54.46% 17.13% 1.63%
Kotak Small Cap Fund 9230 46.06% 16.88% 1.74%
SBI Small Cap Fund 16592 39.94% 15.84% 1.88%
Axis Small Cap Fund 12256 38.54% 19.74% 1.69%

 Above mutual fund schemes selected based on 3- and 5-years Return.

Expense ratio is the amount that an Asset management company charges investors to manage an investment portfolio. This ratio represents all of the management fees and operating costs of the fund.

Who Should Invest in Small Cap Funds?

Investors seeking greater potential gains and are comfortable with higher risks are the ones who can benefit most from the opportunities presented by small caps. For young individuals who have recently begun earning and venturing into investments, it is advisable to include at least one small cap fund in their portfolio, as opposed to older individuals. Since Small Cap Funds exhibit significant volatility in the short term, it is important for investors to contemplate investing in such schemes only if they plan to remain invested for a minimum of five years or more. Additionally, small cap funds can serve as a diversification tool within an investor’s portfolio.

Advantages of Investing in Small Cap Funds

  •  High growth potential
  •  Diversification of portfolio
  •  Early entry in an early stage promising companies
  • Offer higher returns compared to mid and large cap funds

Despite these potential benefits, it’s important to note that investing in small-cap mutual funds also carries risks. It can be more volatile and contains market and business risks.


As we know Smallcap companies are subject to high risk compared to Mid and Large cap companies but it has more potential to generate better return than others. Investors must keep in mind that it can be more volatile in shorter term than in the long run. It’s crucial to carefully assess your risk tolerance and investment objectives before making any investment decisions. Additionally, consider consulting with a financial advisor who can provide personalized advice based on your specific circumstances.