Best Performing Small Cap Mutual Funds in June 2026

Last Reviewed and Updated: 17 Aug 2026

A data driven ranking of 34 direct growth small cap schemes, based on fund data last updated 21 June 2026

Note: this ranking uses fund data from June 2026, roughly two months before this review. Fund rankings by trailing return can shift meaningfully over even a few months; treat the specific ranks and figures below as a snapshot rather than a current leaderboard, and check a live screener for up to date numbers before acting.

Small cap mutual funds occupy the highest risk and highest potential return band of the Indian equity fund universe. SEBI mandates that these schemes hold at least 65% of their assets in small cap stocks, defined as companies ranked 251st onwards by market capitalisation on Indian exchanges. The remaining 35% is available for large cap, mid cap, or further small cap allocation at the manager's discretion.

The small cap universe in India is vast, spanning thousands of companies across every sector, and is considerably less liquid and more volatile than large cap or mid cap stocks. This illiquidity is both the category's greatest risk and its greatest opportunity: companies in this segment can compound at rates impossible for larger businesses constrained by their size, but they can also fall sharply and stay depressed for extended periods.

For investors with a long time horizon, genuine risk tolerance, and the ability to stay invested through drawdowns that can exceed 50%, small cap funds have historically been among the highest wealth creating instruments in Indian equity markets.

This article analyses 34 direct growth small cap schemes using data as of 21 June 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. All figures are drawn directly from the fund data set. The 3 year category benchmark return is 19.84% and the 5 year category benchmark return is 17.39%.

How These Funds Were Ranked

Rankings are presented separately for 3 year and 5 year annualised returns. The two leaderboards look broadly similar in this category, with 7 funds appearing in the top 10 of both tables, which is a particularly strong signal of sustained quality. Expense ratio, AUM, and 3 year Sharpe ratio are included throughout. The benchmark figures are especially useful here: the 3 year benchmark of 19.84% means that only 9 of the 24 funds with 3 year data have actually outperformed the index, while 15 have underperformed it.

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

Seven funds appear in the top 10 of both the 3 year and 5 year tables: Bandhan Small Cap Fund, Invesco India Smallcap Fund, Quant Small Cap Fund, Nippon India Small Cap Fund, Bank of India Small Cap Fund, Sundaram Small Cap Fund, and Union Small Cap Fund. Consistent placement across both horizons in a high volatility category like small cap is a particularly meaningful quality signal.

Ranked by 3 Year Annualised Return

Rank	Fund	3Y Return	5Y Return	Expense Ratio	AUM	Sharpe
1	Bandhan Small Cap Fund	29.16%	22.30%	0.33%	₹27,219.13 Cr	1.08
2	ITI Small Cap Fund	26.35%	18.60%	0.55%	₹3,034.33 Cr	0.97
3	Invesco India Smallcap Fund	24.99%	22.57%	0.39%	₹11,716.88 Cr	0.89
4	Mahindra Manulife Small Cap Fund	24.13%	NA*	0.43%	₹4,590.90 Cr	0.87
5	Bank of India Small Cap Fund	23.64%	21.81%	0.43%	₹2,318.41 Cr	0.79
6	Quant Small Cap Fund	21.48%	21.94%	0.69%	₹31,773.74 Cr	0.76
7	Sundaram Small Cap Fund	20.69%	19.58%	0.86%	₹3,680.99 Cr	0.74
8	Union Small Cap Fund	20.58%	19.54%	0.82%	₹2,094.49 Cr	0.75
9	Nippon India Small Cap Fund	19.68%	21.90%	0.55%	₹74,604.07 Cr	0.72
10	DSP Small Cap Fund	19.54%	19.46%	0.64%	₹18,358.18 Cr	0.68

24 of the 34 funds have a 3 year return. NA* indicates the fund does not yet have sufficient track record. The 3 year category benchmark return is 19.84%, meaning only the top 9 funds above have outperformed it.

Ranked by 5 Year Annualised Return

Rank	Fund	5Y Return	3Y Return	Expense Ratio	AUM	Sharpe
1	Invesco India Smallcap Fund	22.57%	24.99%	0.39%	₹11,716.88 Cr	0.89
2	Bandhan Small Cap Fund	22.30%	29.16%	0.33%	₹27,219.13 Cr	1.08
3	Quant Small Cap Fund	21.94%	21.48%	0.69%	₹31,773.74 Cr	0.76
4	Nippon India Small Cap Fund	21.90%	19.68%	0.55%	₹74,604.07 Cr	0.72
5	Bank of India Small Cap Fund	21.81%	23.64%	0.43%	₹2,318.41 Cr	0.79
6	HSBC Small Cap Fund	20.49%	18.28%	0.56%	₹16,876.72 Cr	0.57
7	LIC MF Small Cap Fund	19.84%	19.08%	0.85%	₹694.93 Cr	0.64
8	Edelweiss Small Cap Fund	19.61%	19.03%	0.52%	₹6,155.89 Cr	0.72
9	Sundaram Small Cap Fund	19.58%	20.69%	0.86%	₹3,680.99 Cr	0.74
10	Union Small Cap Fund	19.54%	20.58%	0.82%	₹2,094.49 Cr	0.75

22 of the 34 funds have a 5 year return. The 5 year category benchmark return is 17.39%, meaning all 10 funds above have outperformed over this period.

A Closer Look at the Top Performers

1. Bandhan Small Cap Fund: Leads on Returns, Cost, and Risk Adjusted Performance

Bandhan Small Cap Fund, managed by Manish Gunwani, is the outstanding fund in this data set. It delivers the highest 3 year return in the category at 29.16%, the highest Sharpe ratio at 1.08, and the second lowest expense ratio among funds with a track record at 0.33%. It also ranks 2nd on the 5 year table at 22.30%. This combination of leading returns, best risk adjusted score, and near lowest cost across a genuinely large AUM base of Rs 27,219.13 Cr is exceptionally rare in any category. A Sharpe ratio above 1.0 in a small cap fund, where volatility is structurally higher than in other categories, indicates that Bandhan has delivered its strong returns with relatively controlled drawdowns compared to peers.

2. Invesco India Smallcap Fund: Best 5 Year Return and Most Consistent Overall

Invesco India Smallcap Fund, managed by Taher Badshah, leads the 5 year table at 22.57% and ranks 3rd on the 3 year table at 24.99%. Its expense ratio of 0.39% is the second lowest among funds with a track record, its Sharpe ratio of 0.89 is the third highest in the category, and its AUM of Rs 11,716.88 Cr is well suited to the small cap universe. The combination of top placement on both horizons alongside competitive cost and strong risk adjusted metrics makes Invesco India Smallcap Fund the most comprehensively strong option in this data set over the long term.

3. ITI Small Cap Fund: Highest 3 Year Return Among Smaller Funds

ITI Small Cap Fund, managed by Dhimant Shah, ranks 2nd on the 3 year table at 26.35% and carries the second highest Sharpe ratio in the category at 0.97, indicating strong returns with well controlled volatility. Its 5 year return of 18.60% is solid but places it outside the top 10 on that horizon, suggesting the fund's strongest outperformance has been concentrated in the more recent 3 year window. At Rs 3,034.33 Cr in AUM, it remains small enough to invest with agility across the small cap universe.

4. Mahindra Manulife Small Cap Fund: Strong 3 Year Returns at Low Cost

Mahindra Manulife Small Cap Fund, managed by Krishna Sanghavi, ranks 4th on the 3 year table at 24.13% with a Sharpe ratio of 0.87 and an expense ratio of 0.43%, making it one of the more cost efficient funds among the top performers. The fund does not yet have a 5 year track record, limiting the ability to assess its longer term consistency. At Rs 4,590.90 Cr in AUM, its size is appropriate for the small cap universe.

5. Nippon India Small Cap Fund: The Scale and Consistency Trade Off

Nippon India Small Cap Fund, managed by Samir Rachh, is the largest fund in the entire small cap category at Rs 74,604.07 Cr in AUM, more than 90% larger than the second placed HDFC Small Cap Fund. Despite this scale, it ranks 9th on the 3 year table (19.68%, just below the 19.84% benchmark) and 4th on the 5 year table (21.90%). Managing Rs 74,604 Cr in small cap stocks, where individual company liquidity is limited, is a genuine constraint on portfolio flexibility.

That the fund has managed to deliver near benchmark 3 year returns and above benchmark 5 year returns despite this constraint is notable, but investors considering it should understand that its size will increasingly challenge its ability to generate the kind of alpha that smaller, more agile small cap funds can produce.

Best Risk Adjusted Returns: Highest Sharpe Ratio

The Sharpe ratio is particularly informative in the small cap category, where all funds experience high volatility. A higher Sharpe score means the fund delivered more return per unit of risk, distinguishing funds that manage downside well from those that simply ride the broader small cap wave.

Fund	3Y Sharpe Ratio	3Y Return
Bandhan Small Cap Fund	1.08	29.16%
ITI Small Cap Fund	0.97	26.35%
Invesco India Smallcap Fund	0.89	24.99%
Mahindra Manulife Small Cap Fund	0.87	24.13%
Bank of India Small Cap Fund	0.79	23.64%
Quant Small Cap Fund	0.76	21.48%

All six funds in the Sharpe ratio table have also delivered 3 year returns above 21%, meaning the best risk adjusted performers in this category have also been the best absolute return generators. Bandhan Small Cap Fund's Sharpe ratio of 1.08 is exceptional for a small cap equity fund, where Sharpe ratios above 0.8 are already considered strong. The top five funds all carry Sharpe ratios above 0.85, suggesting a cluster of genuinely high quality fund managers at the top of this category.

Lowest Cost Small Cap Funds

Cost efficiency matters in small cap funds because the category already carries higher operational costs than large cap funds due to the complexity of managing a large number of smaller, less liquid positions. Keeping expense ratios low is therefore a particularly meaningful advantage for investors over long holding periods.

Fund	Expense Ratio	3Y Return
Mirae Asset Small Cap Fund	0.32%	NA*
Bandhan Small Cap Fund	0.33%	29.16%
Invesco India Smallcap Fund	0.39%	24.99%
TrustMF Small Cap Fund	0.40%	NA*
Mahindra Manulife Small Cap Fund	0.43%	24.13%
Bank of India Small Cap Fund	0.43%	23.64%
Canara Robeco Small Cap Fund	0.46%	15.18%

NA* indicates the fund does not yet have a 3 year track record.

Mirae Asset Small Cap Fund has the lowest expense ratio in the category at 0.32% but does not yet have return data for comparison. Among funds with established performance, Bandhan Small Cap Fund at 0.33% is the clear cost leader and also the top return generator in the category simultaneously, a combination that is exceptionally unusual.

Invesco India Smallcap Fund at 0.39% also pairs a near lowest cost with top 3 performance on both time horizons. Canara Robeco Small Cap Fund, while competitively priced at 0.46%, has delivered a 3 year return of only 15.18%, well below the 19.84% category benchmark.

The Largest Small Cap Funds by AUM

The small cap category has experienced very large AUM inflows in recent years. Several funds now manage tens of thousands of crores in a universe of stocks where individual company liquidity can be limited, creating a meaningful tension between scale and performance.

Fund	AUM	3Y Return	5Y Return
Nippon India Small Cap Fund	₹74,604.07 Cr	19.68%	21.90%
HDFC Small Cap Fund	₹38,809.48 Cr	15.10%	17.81%
SBI Small Cap Fund	₹37,394.61 Cr	13.82%	15.47%
Quant Small Cap Fund	₹31,773.74 Cr	21.48%	21.94%
Axis Small Cap Fund	₹27,840.05 Cr	16.93%	18.80%
Bandhan Small Cap Fund	₹27,219.13 Cr	29.16%	22.30%

The AUM table reveals a stark divergence in the small cap category. The three largest funds by AUM, Nippon India, HDFC, and SBI, have all delivered 3 year returns below or near the 19.84% category benchmark, with HDFC (15.10%) and SBI (13.82%) meaningfully underperforming it.

In contrast, Bandhan Small Cap Fund, the sixth largest, has delivered the highest 3 year return in the entire category at 29.16%, and Quant Small Cap Fund has delivered 21.48% despite its Rs 31,773.74 Cr AUM. HDFC and SBI Small Cap Funds have also delivered 5 year returns below the 5 year benchmark of 17.39% for SBI (15.47%) and close to it for HDFC (17.81%), raising questions about whether their very large AUM is now constraining their ability to generate alpha in the small cap universe.

What These Funds Actually Hold

Small cap funds have the broadest and most varied portfolio composition of any equity fund category in India. The eligible universe spans thousands of companies across every industry, giving fund managers far more room for differentiation than in large cap or even mid cap funds. As a result, the top holdings across funds in this data set are far less homogeneous than in other categories reviewed in this series.

The stronger performing funds in this data set tend to run more concentrated portfolios with higher top 10 holding weights, reflecting higher conviction in their best ideas. Bandhan Small Cap Fund and Invesco India Smallcap Fund both exhibit this pattern. Funds with larger AUM such as Nippon India and SBI Small Cap tend to hold more positions with smaller individual weights, which limits the impact of any single strong performer on overall fund returns but also reduces their exposure to the idiosyncratic small company risks that make the category both volatile and rewarding.

Sector exposure varies considerably. Capital goods, industrials, chemicals, healthcare, and consumer discretionary are frequent themes across the top performers. Funds with weaker recent performance tend to have higher exposure to sectors that have lagged the broader small cap index, including some financial services and consumption names at the lower end of the market cap spectrum.

Things to Consider Before Investing

• Only 9 of 24 funds with 3 year data have beaten the category benchmark of 19.84%. This means the majority of small cap funds with a track record have underperformed a passive index over 3 years, which is a strong argument for prioritising fund selection in this category rather than picking any small cap fund at random.

• AUM scale is a genuine performance constraint in small cap. The data in this article shows clearly that the three largest funds by AUM, Nippon India, HDFC, and SBI, have all delivered 3 year returns below the category average. Investors should be cautious about placing large amounts into very large small cap funds, as the fund manager's ability to move in and out of positions in the small cap universe is constrained by the volume of capital they must deploy.

• Bandhan Small Cap Fund is in a class of its own on the combined metrics of returns, Sharpe ratio, and cost. However, investors should note that its strong 3 year outperformance may partly reflect the strong mid and small cap cycle of the 2023 to 2025 period, and a longer track record across a fuller market cycle would provide greater confidence in its consistency.

• Small cap funds require a minimum 7 year investment horizon. The category can fall 40% to 60% during broad market downturns and may take 2 to 3 years to recover those levels. Investors who cannot hold through a significant drawdown without redeeming should not be in this category at all, regardless of which fund they choose.

• Ten funds in the data set have no 3 year or 5 year return history. Among these, Mirae Asset Small Cap Fund (0.32%) and TrustMF Small Cap Fund (0.40%) offer the lowest expense ratios in the entire category and are worth monitoring as their track records develop. Motilal Oswal Small Cap Fund, with Rs 6,515.37 Cr in AUM despite having no published return data, is also notable as a newer entrant attracting significant investor interest.

• Invesco India Smallcap Fund and Bandhan Small Cap Fund stand out as the two funds with the strongest combination of metrics across the entire data set: both appear in the top 3 of each horizon table, both carry expense ratios below 0.40%, and both have Sharpe ratios well above the category average.

 Full Fund Universe: Quick Reference

Fund	3Y Return	5Y Return	Expense Ratio	AUM
Bandhan Small Cap Fund	29.16%	22.30%	0.33%	₹27,219.13 Cr
ITI Small Cap Fund	26.35%	18.60%	0.55%	₹3,034.33 Cr
Invesco India Smallcap Fund	24.99%	22.57%	0.39%	₹11,716.88 Cr
Mahindra Manulife Small Cap Fund	24.13%	NA*	0.43%	₹4,590.90 Cr
Bank of India Small Cap Fund	23.64%	21.81%	0.43%	₹2,318.41 Cr
Quant Small Cap Fund	21.48%	21.94%	0.69%	₹31,773.74 Cr
Sundaram Small Cap Fund	20.69%	19.58%	0.86%	₹3,680.99 Cr
Union Small Cap Fund	20.58%	19.54%	0.82%	₹2,094.49 Cr
Nippon India Small Cap Fund	19.68%	21.90%	0.55%	₹74,604.07 Cr
DSP Small Cap Fund	19.54%	19.46%	0.64%	₹18,358.18 Cr
LIC MF Small Cap Fund	19.08%	19.84%	0.85%	₹694.93 Cr
Edelweiss Small Cap Fund	19.03%	19.61%	0.52%	₹6,155.89 Cr
Aditya Birla Sun Life Small Cap Fund	18.31%	15.34%	0.78%	₹5,452.53 Cr
HSBC Small Cap Fund	18.28%	20.49%	0.56%	₹16,876.72 Cr
UTI Small Cap Fund	17.56%	18.11%	0.67%	₹4,970.44 Cr
Franklin India Small Cap Fund	17.37%	19.35%	0.77%	₹13,847.34 Cr
PGIM India Small Cap Fund	17.30%	NA*	0.66%	₹1,567.38 Cr
Axis Small Cap Fund	16.93%	18.80%	0.61%	₹27,840.05 Cr
Canara Robeco Small Cap Fund	15.18%	18.43%	0.46%	₹13,363.68 Cr
HDFC Small Cap Fund	15.10%	17.81%	0.73%	₹38,809.48 Cr
Kotak Small Cap Fund	14.72%	15.43%	0.58%	₹17,806.38 Cr
ICICI Prudential Smallcap Fund	14.68%	17.20%	0.65%	₹8,948.97 Cr
SBI Small Cap Fund	13.82%	15.47%	0.74%	₹37,394.61 Cr
Tata Small Cap Fund	13.69%	16.94%	0.43%	₹11,645.01 Cr
Mirae Asset Small Cap Fund	NA*	NA*	0.32%	₹4,380.82 Cr
TrustMF Small Cap Fund	NA*	NA*	0.40%	₹1,890.75 Cr
Bajaj Finserv Small Cap Fund	NA*	NA*	0.52%	₹1,982.67 Cr
Motilal Oswal Small Cap Fund	NA*	NA*	0.67%	₹6,515.37 Cr
Helios Small Cap Fund	NA*	NA*	0.68%	₹1,037.25 Cr
JM Small Cap Fund	NA*	NA*	0.68%	₹729.62 Cr
Baroda BNP Paribas Small Cap Fund	NA*	NA*	0.80%	₹1,222.14 Cr
Groww Small Cap Fund	NA*	NA*	0.62%	₹343.33 Cr
Quantum Small Cap Fund	NA*	NA*	0.70%	₹224.66 Cr
Samco Small Cap Fund	NA*	NA*	0.94%	₹151.30 Cr

NA* indicates insufficient track record for this metric. Table sorted by 3 year return. The 3 year category benchmark is 19.84% and the 5 year category benchmark is 17.39%.

This article is based on fund data as of 21 June 2026 and is intended for informational purposes only and is not investment advice. Mutual fund investments are subject to market risks and past performance does not guarantee future returns. Small cap funds are subject to higher volatility and liquidity risk than other equity fund categories. Investors should read all scheme related documents carefully and consult a SEBI registered financial advisor before investing.

Disclaimer

The content on this website is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or a solicitation to buy or sell any security, mutual fund, or financial instrument. Equity Research India is not a SEBI-registered investment advisor or research analyst, and nothing on this site constitutes personalized financial advice.

Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future returns. NAV, returns, rankings, and other data may change and may not reflect the most current information at the time of reading.

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