Best Small Cap Mutual Funds for May 2026 Based on 5‑Year CAGR: Bandhan Small Cap Fund, Invesco India Smallcap Fund and More

Small cap mutual funds invest in companies that are relatively smaller in size but have the potential for high growth over time. These schemes typically follow active strategies to identify emerging businesses across sectors such as manufacturing, consumer goods, financial services, and industrials.

Due to their exposure to smaller companies, they tend to be more volatile compared to large‑cap and mid‑cap funds. Based on data for May 2026, the following small cap mutual funds are among the top performers based on 5‑year CAGR.

Best Small Cap Mutual Funds Based on 5‑Year CAGR

Note: Data as on May 13, 2026

Bandhan Small Cap Fund

Bandhan Small Cap Fund invests primarily in small‑cap companies with the aim of generating long‑term capital appreciation. The scheme focuses on emerging businesses across sectors such as manufacturing, consumer goods, financial services, and industrials.

It follows an actively managed strategy and may identify companies at an early stage of expansion. The fund is categorised as very high risk due to the volatility and liquidity characteristics associated with small‑cap stocks.

Invesco India Smallcap Fund

Invesco India Smallcap Fund invests in small‑cap companies across sectors with a focus on long‑term wealth creation. The scheme seeks businesses with scalable models, improving earnings potential, and growth opportunities.

It follows an active stock selection approach and allocates across emerging sectors based on market conditions. Returns can vary significantly due to volatility inherent in small‑cap investing and changing economic conditions.

Nippon India Small Cap Fund

Nippon India Small Cap Fund is a large scheme within the category and invests in emerging companies with long‑term growth potential. The portfolio is diversified across sectors such as industrials, consumer, healthcare, chemicals, and financial services.

It follows an active management approach to identify businesses aligned with economic growth trends. The scheme carries very high risk as small‑cap stocks tend to experience sharp movements across market cycles.

Bank of India Small Cap Fund

Bank of India Small Cap Fund invests mainly in equity and equity‑related instruments of small‑cap companies. The scheme aims to generate capital appreciation by identifying companies with improving fundamentals and growth potential.

It follows an active investment strategy and may allocate across sectors benefiting from domestic consumption and industrial expansion. The fund is categorised as very high risk due to higher volatility and liquidity risks.

Quant Small Cap Fund

Quant Small Cap Fund follows a dynamic strategy focused on small‑cap companies across sectors and themes. The scheme uses quantitative models along with active management to identify opportunities.

Portfolio allocation can change significantly depending on market trends, liquidity conditions, and macroeconomic indicators. This approach results in very high risk with potential for sharp short‑term fluctuations.

HSBC Small Cap Fund

HSBC Small Cap Fund invests predominantly in small‑cap companies aiming for long‑term capital growth. The scheme focuses on businesses with scalable operations, competitive advantages, and earnings potential.

It maintains diversification across sectors such as industrials, consumer goods, healthcare, and financial services. The fund remains sensitive to market volatility due to its exposure to smaller companies.

Edelweiss Small Cap Fund

Edelweiss Small Cap Fund invests in small‑cap companies that have the potential to grow into larger businesses. The scheme follows an active strategy based on valuation, earnings visibility, and business quality.

Its portfolio may include companies linked to domestic growth, infrastructure spending, and consumer demand. The fund carries very high risk due to the volatility and liquidity aspects of small‑cap stocks.

Franklin India Small Cap Fund

Franklin India Small Cap Fund focuses on smaller companies with long‑term growth prospects. The scheme aims to identify fundamentally strong businesses that can expand their market presence over time.

Its portfolio is diversified across sectors including industrials, chemicals, healthcare, consumer goods, and financial services. The fund is classified as very high risk due to susceptibility to market corrections and economic slowdowns.

Sundaram Small Cap Fund

Sundaram Small Cap Fund invests in small‑cap companies across sectors with the objective of capital appreciation. The scheme focuses on identifying emerging businesses with scalable operations and growth opportunities.

It follows an active investment approach and may adjust sector exposure based on market conditions. The fund carries a very high risk profile due to the inherent volatility of smaller companies.

Union Small Cap Fund

Union Small Cap Fund invests in equity and equity‑related securities of small‑cap companies. The scheme focuses on businesses with improving fundamentals and favourable industry positioning.

Its portfolio may include companies from sectors such as industrials, manufacturing, consumer services, and healthcare. Exposure to small‑cap stocks results in higher volatility and liquidity risks over market cycles.

Read More: Best Equity Mutual Funds for May 2026 Based on 5‑Year CAGR.

Want to track these market movements in Hindi? Visit Angel One News for daily updates and comprehensive share market news in Hindi.

Conclusion

Small cap mutual funds included in this list are primarily focused on identifying emerging companies with growth potential across sectors. Their performance reflects exposure to evolving business models, sectoral opportunities, and domestic economic trends.

These schemes remain sensitive to market cycles due to the nature of small‑cap investing. As of May 2026, the data highlights how small cap funds have performed over a 5‑year period.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.