Best Performing Small Cap Mutual Funds in July 2026

A data driven ranking of 34 direct growth small cap schemes, based on fund data last updated 19 July 2026

Small cap mutual funds invest predominantly in companies ranked 251st and beyond by market capitalisation on Indian exchanges. SEBI mandates a minimum 65% allocation to these small cap stocks, with the remaining 35% available for large cap or mid cap exposure at the fund manager's discretion.

This is the highest volatility mainstream equity category in the Indian mutual fund universe, since the eligible universe consists of the least liquid, least analysed, and most cyclically sensitive companies on the exchange. It has also historically offered the highest long term return potential of any diversified equity category, a combination that makes manager selection and time horizon especially important here.

This article analyses 34 direct growth small cap schemes using data as of 19 July 2026. Of the 34 funds, 24 have a 3 year return and 22 have a 5 year return, with 10 funds too recently launched to have either, a larger proportion of recent launches than in the large cap or flexi cap categories, reflecting the wave of new small cap fund launches over the past two to three years.

All figures are drawn directly from the fund data set. The 3 year category benchmark return is 18.41% and the 5 year category benchmark return is 15.58%.

How These Funds Were Ranked

Rankings are presented separately for 3 year and 5 year annualised returns, shown side by side so investors can judge performance over whichever period matches their own investment timeline. Expense ratio, AUM, and 3 year Sharpe ratio are included throughout for additional context, since cost and volatility both matter more in this category than in more conservative ones.

Top 10 Small Cap Funds: 3 Year vs 5 Year Rankings

Seven funds appear in the top 10 of both tables, a meaningfully broad overlap for a category this volatile, suggesting the strongest small cap managers have sustained their edge across more than one market cycle rather than benefiting from a single strong stretch.

Ranked by 3 Year Annualised Return

Rank	Fund	3Y Return	5Y Return	Expense Ratio	AUM	Sharpe
1	Bandhan Small Cap Fund Direct Growth	27.93%	20.31%	0.35%	₹28,466.18 Cr	1.03
2	ITI Small Cap Fund Direct Growth	26.02%	17.30%	0.55%	₹3,321.83 Cr	0.99
3	Invesco India Smallcap Fund Direct Growth	24.17%	20.49%	0.39%	₹13,384.88 Cr	0.93
4	Bank of India Small Cap Fund Direct Growth	22.74%	19.76%	0.43%	₹2,572.40 Cr	0.79
5	Mahindra Manulife Small Cap Fund Direct Growth	22.58%	N/A*	0.42%	₹4,930.36 Cr	0.87
6	Quant Small Cap Fund Growth Option Direct Plan	20.66%	19.83%	0.81%	₹33,739.04 Cr	0.76
7	Union Small Cap Fund Direct Growth	19.36%	17.14%	0.82%	₹2,267.79 Cr	0.73
8	Sundaram Small Cap Fund Direct Plan Growth Option	19.14%	17.50%	0.85%	₹3,871.80 Cr	0.71
9	DSP Small Cap Fund Direct Plan Growth	19.07%	18.15%	0.64%	₹19,634.90 Cr	0.66
10	LIC MF Small Cap Fund Direct Growth	18.29%	18.35%	1.44%	₹743.33 Cr	0.64

*N/A indicates the fund's inception date doesn't yet allow for a 5 year track record. 24 of the 34 funds in the data set have a 3 year return.

Ranked by 5 Year Annualised Return

Rank	Fund	5Y Return	3Y Return	Expense Ratio	AUM	Sharpe
1	Invesco India Smallcap Fund Direct Growth	20.49%	24.17%	0.39%	₹13,384.88 Cr	0.93
2	Bandhan Small Cap Fund Direct Growth	20.31%	27.93%	0.35%	₹28,466.18 Cr	1.03
3	Quant Small Cap Fund Growth Option Direct Plan	19.83%	20.66%	0.81%	₹33,739.04 Cr	0.76
4	Bank of India Small Cap Fund Direct Growth	19.76%	22.74%	0.43%	₹2,572.40 Cr	0.79
5	Nippon India Small Cap Fund Direct Plan Growth Plan	19.73%	17.77%	0.54%	₹78,407.03 Cr	0.68
6	LIC MF Small Cap Fund Direct Growth	18.35%	18.29%	1.44%	₹743.33 Cr	0.64
7	Edelweiss Small Cap Fund Direct Growth	18.32%	18.10%	0.52%	₹6,579.72 Cr	0.71
8	DSP Small Cap Fund Direct Plan Growth	18.15%	19.07%	0.64%	₹19,634.90 Cr	0.66
9	HSBC Small Cap Fund Direct Growth	18.12%	16.68%	0.56%	₹17,830.20 Cr	0.57
10	Sundaram Small Cap Fund Direct Plan Growth Option	17.50%	19.14%	0.85%	₹3,871.80 Cr	0.71

22 of the 34 funds in the data set have a 5 year track record; the rest were launched too recently.

Seven funds place in the top 10 of both lists: Invesco India Smallcap, Bandhan Small Cap, Quant Small Cap, Bank of India Small Cap, LIC MF Small Cap, DSP Small Cap, and Sundaram Small Cap. Bandhan Small Cap Fund leads the 3 year table by a wide margin (27.93% versus 26.02% for second place) while sitting a close second on the 5 year table, a genuinely strong showing on both counts.

All returns are direct plan, growth option figures, measured predominantly against the Nifty Smallcap 250 TRI (the 3 year benchmark return across the set is 18.41% and the 5 year benchmark return is 15.58%, so every fund shown above has outperformed its benchmark on the relevant horizon).

A Closer Look at the Top Performers

1. Bandhan Small Cap Fund: Leads the 3 Year Table and Best Sharpe Ratio in the Category

Bandhan Small Cap Fund, managed by Manish Gunwani, tops the 3 year list at 27.93% while also posting the best 3 year Sharpe ratio in the entire category at 1.03, and the lowest expense ratio among the top performers at 0.35%. It also runs the least concentrated portfolio among the category's leaders, with top 10 holdings at just 19.37%, led by REC (3.19%) and Sobha (3.05%), a notably diversified approach for a fund posting the category's strongest returns. With ₹28,466.18 Cr in assets, it also manages this performance at a scale larger than all but a few peers.

2. ITI Small Cap Fund: Strong Returns, Concentrated Bets

ITI Small Cap Fund, managed by Dhimant Shah, delivered a 26.02% 3 year return and the second best Sharpe ratio in the category (0.99), alongside the strongest 1 year return among the top performers at 12.27%. Its top 10 holdings sit at 23.50%, led by Acutaas Chemicals (4.51%), a specialty chemicals name that appears far more often among small cap portfolios than in any other category reviewed in this series.

3. Invesco India Smallcap Fund: Best 5 Year Return and Lowest Cost Among Leaders

Invesco India Smallcap Fund, managed by Taher Badshah, leads the 5 year table at 20.49% while ranking third on the 3 year table (24.17%), all at the lowest expense ratio among the category's top performers (0.39%). Its top 10 holdings, at 37.37%, the most concentrated among the funds profiled here, are led by healthcare and consumer names including Sai Life Sciences (4.9%) and Aditya Infotech (4.55%).

4. Quant Small Cap Fund: Scale Meets Concentration

Quant Small Cap Fund, managed by Sanjeev Sharma, is the largest actively managed fund among the category's stronger performers at ₹33,739.04 Cr, posting a 20.66% 3 year return and 19.83% 5 year return. Consistent with other Quant managed funds across this series, it carries a distinctive concentration in specific themes, with HFCL (6.03%), RBL Bank (5.46%), and a cluster of Adani group holdings (Adani Power, Adani Enterprises, and Adani Green Energy together exceeding 10%) making up a large share of its top 10 holdings at 35.92%.

5. Bank of India Small Cap Fund and Mahindra Manulife Small Cap Fund: Consistent Mid Tier Performers

Bank of India Small Cap Fund (managed by Alok Singh) and Mahindra Manulife Small Cap Fund (managed by Krishna Sanghavi) both delivered 3 year returns above 22%, with Bank of India additionally placing fourth on the 5 year table at 19.76%. Bank of India Small Cap posted the strongest 1 year return among all funds profiled in this article at 14.43%. Mahindra Manulife does not yet have a 5 year track record, having built its current shape more recently, but its 3 year Sharpe ratio of 0.87 ranks among the better risk adjusted showings in the category.

Best Risk Adjusted Returns (Highest Sharpe Ratio)

The Sharpe ratio measures how much return a fund generated per unit of risk taken, where a higher number means the fund's gains came with comparatively less volatility. This matters more in small cap investing than almost anywhere else in the mutual fund universe, given how much more volatile the category is than large cap or flexi cap funds.

Fund	3Y Sharpe Ratio	3Y Return
Bandhan Small Cap Fund	1.03	27.93%
ITI Small Cap Fund	0.99	26.02%
Invesco India Smallcap Fund	0.93	24.17%
Mahindra Manulife Small Cap Fund	0.87	22.58%
Bank of India Small Cap Fund	0.79	22.74%

Unusually for such a volatile category, the top 3 funds by raw 3 year return, Bandhan, ITI, and Invesco India, are also the top 3 by Sharpe ratio, suggesting these particular funds have delivered their outperformance without a proportional increase in risk, rather than simply taking on more volatility to chase returns.

Lowest Cost Small Cap Funds

Expense ratio compounds over time, so it's worth weighing alongside returns, especially in a category where costs have historically run higher than large cap or flexi cap funds:

Fund	Expense Ratio	3Y Return
Bandhan Small Cap Fund Direct Growth	0.35%	27.93%
Mirae Asset Small Cap Fund Direct Growth	0.35%	N/A*
Invesco India Smallcap Fund Direct Growth	0.39%	24.17%
Mahindra Manulife Small Cap Fund Direct Growth	0.42%	22.58%
Tata Small Cap Fund Direct Growth	0.43%	13.05%

*N/A: Mirae Asset Small Cap Fund was launched in January 2025 and does not yet have a 3 year return.

Bandhan Small Cap Fund is again the standout, combining the joint lowest expense ratio in the category with the highest 3 year return of any fund reviewed, a rare pairing of low cost and top tier performance in a category not usually known for either.

The Largest Small Cap Funds by AUM

Size is a genuinely bigger consideration in small cap investing than in other categories, since a very large fund can struggle to build meaningful positions in the smaller, less liquid stocks that define this segment without moving the price against itself:

Fund	AUM	3Y Return	5Y Return
Nippon India Small Cap Fund Direct Plan Growth Plan	₹78,407.03 Cr	17.77%	19.73%
HDFC Small Cap Fund Direct Growth Option	₹40,416.81 Cr	13.62%	16.01%
SBI Small Cap Fund Direct Plan Growth	₹40,156.66 Cr	13.68%	14.75%
Quant Small Cap Fund Growth Option Direct Plan	₹33,739.04 Cr	20.66%	19.83%
Axis Small Cap Fund Direct Growth	₹29,393.79 Cr	16.58%	16.96%

The category's very largest funds, Nippon India, HDFC, and SBI Small Cap, post noticeably more moderate returns than the smaller, more nimble funds at the top of the return rankings, a pattern consistent with the general concern that scale can become a genuine constraint once a small cap fund grows large enough. Quant Small Cap Fund is the clearest exception, combining substantial scale with a top 5 return.

What These Funds Actually Hold

Across the data set, small cap portfolios average 95.1% in equity, the lowest average equity allocation of any category in this series, with a higher cash buffer (averaging 4.8%) reflecting the greater difficulty of deploying capital quickly into less liquid small cap names.

No single stock dominates the category's top holdings the way large private banks dominate large cap portfolios; the most frequently appearing names, Navin Fluorine International, Karur Vysya Bank, Multi Commodity Exchange, and Kirloskar Oil Engines, each appear in only a handful of funds' top five holdings, reflecting how much more manager specific stock selection drives this category compared to large cap or flexi cap.

Concentration is also generally lower here than in other categories: the category average top 10 holding weight is 26.2%, and even the most concentrated fund, Invesco India Smallcap at 37.37%, would rank as only moderately concentrated in the flexi cap or mid cap categories.

Things to Consider Before Investing

· This is the highest volatility mainstream category in this series. Beta across the data set runs consistently below 1 (averaging 0.85), which reflects small cap stocks' own high volatility relative to the benchmark rather than defensiveness, and tracking error averages 6.36, the highest of any category reviewed.

· Scale is a genuine constraint here in a way it is not in large cap investing. The category's largest funds, Nippon India, HDFC, and SBI Small Cap, post more moderate returns than several much smaller funds, consistent with the concern that very large small cap funds can struggle to deploy capital as nimbly.

· A larger share of this category is newly launched than any other reviewed in this series. Ten funds in the data set, including Motilal Oswal Small Cap and Groww Small Cap, don't yet have a 3 year or 5 year history.

· Expense ratio compounds, and the spread is wide. The gap between the cheapest funds (0.35%) and the priciest (LIC MF Small Cap Fund at 1.44%, Samco Small Cap Fund at 1.58% per the source data) is large enough to meaningfully affect long term net returns.

· Risk adjusted return and raw return have moved together unusually closely at the top of this category, with Bandhan, ITI, and Invesco India leading both measures, though this should not be assumed to hold for every fund further down the list.

Full Fund Universe: Quick Reference

Fund	3Y Return	5Y Return	Expense Ratio	AUM
Bandhan Small Cap Fund Direct Growth	27.93%	20.31%	0.35%	₹28,466.18 Cr
ITI Small Cap Fund Direct Growth	26.02%	17.30%	0.55%	₹3,321.83 Cr
Invesco India Smallcap Fund Direct Growth	24.17%	20.49%	0.39%	₹13,384.88 Cr
Bank of India Small Cap Fund Direct Growth	22.74%	19.76%	0.43%	₹2,572.40 Cr
Mahindra Manulife Small Cap Fund Direct Growth	22.58%	N/A*	0.42%	₹4,930.36 Cr
Quant Small Cap Fund Growth Option Direct Plan	20.66%	19.83%	0.81%	₹33,739.04 Cr
Union Small Cap Fund Direct Growth	19.36%	17.14%	0.82%	₹2,267.79 Cr
Sundaram Small Cap Fund Direct Plan Growth Option	19.14%	17.50%	0.85%	₹3,871.80 Cr
DSP Small Cap Fund Direct Plan Growth	19.07%	18.15%	0.64%	₹19,634.90 Cr
LIC MF Small Cap Fund Direct Growth	18.29%	18.35%	1.44%	₹743.33 Cr
Edelweiss Small Cap Fund Direct Growth	18.10%	18.32%	0.52%	₹6,579.72 Cr
Nippon India Small Cap Fund Direct Plan Growth Plan	17.77%	19.73%	0.54%	₹78,407.03 Cr
Aditya Birla Sun Life Small Cap Fund Direct Plan Growth	16.87%	13.44%	0.78%	₹5,731.32 Cr
HSBC Small Cap Fund Direct Growth	16.68%	18.12%	0.56%	₹17,830.20 Cr
UTI Small Cap Fund Direct Growth	16.68%	16.43%	0.87%	₹5,213.42 Cr
Axis Small Cap Fund Direct Growth	16.58%	16.96%	0.61%	₹29,393.79 Cr
Franklin India Small Cap Fund Direct Growth	16.22%	17.43%	0.77%	₹14,336.42 Cr
PGIM India Small Cap Fund Direct Growth	15.63%	N/A*	0.66%	₹1,649.96 Cr
Canara Robeco Small Cap Fund Direct Growth	14.53%	16.43%	0.44%	₹13,967.05 Cr
Kotak Small Cap Direct Growth	13.99%	14.25%	0.58%	₹18,690.79 Cr
SBI Small Cap Fund Direct Plan Growth	13.68%	14.75%	0.74%	₹40,156.66 Cr
HDFC Small Cap Fund Direct Growth Option	13.62%	16.01%	0.76%	₹40,416.81 Cr
Tata Small Cap Fund Direct Growth	13.05%	15.99%	0.43%	₹12,528.85 Cr
ICICI Prudential Smallcap Fund Direct Plan Growth	12.89%	14.52%	0.71%	₹9,378.80 Cr
Samco Small Cap Fund Direct Growth	N/A*	N/A*	1.58%	₹158.97 Cr
Mirae Asset Small Cap Fund Direct Growth	N/A*	N/A*	0.35%	₹4,842.22 Cr
Baroda BNP Paribas Small Cap Fund Direct Growth	N/A*	N/A*	0.80%	₹1,258.55 Cr
Bajaj Finserv Small Cap Fund Direct Growth	N/A*	N/A*	0.52%	₹2,210.90 Cr
Quantum Small Cap Fund Direct Growth	N/A*	N/A*	0.70%	₹242.61 Cr
Motilal Oswal Small Cap Fund Direct Growth	N/A*	N/A*	0.82%	₹7,179.39 Cr
JM Small Cap Fund Direct Growth	N/A*	N/A*	0.68%	₹809.39 Cr
Groww Small Cap Fund Direct Growth	N/A*	N/A*	0.62%	₹439.70 Cr
Helios Small Cap Fund Direct Growth	N/A*	N/A*	0.82%	₹1,037.25 Cr
TrustMF Small Cap Fund Direct Growth	N/A*	N/A*	0.45%	₹2,476.03 Cr

*N/A indicates insufficient track record for this metric, typically funds launched between 2023 and 2026.

This article is based on fund data as of 19 July 2026 and is intended for informational purposes only and is not investment advice. Mutual fund investments are subject to market risks, and small cap funds in particular carry meaningfully higher volatility than other equity categories; past performance does not guarantee future returns. Investors should read scheme related documents carefully and consult a SEBI registered financial advisor before investing.