Small cap mutual funds in India have emerged as one of the top-performing investment categories in 2025, delivering impressive returns despite market volatility. These funds focus on high-growth companies with a market capitalisation between ₹2,000 crore and ₹10,000 crore, often outperforming large and mid-cap peers in bullish phases. In this updated 2025 guide, we analyse the best small cap mutual funds in India based on their latest 1-year, 3-year, and 5-year returns, risk-adjusted performance, and portfolio quality, helping you choose the right fund for long-term wealth creation.
A small cap mutual fund is an equity-oriented mutual fund that invests mainly in companies ranked 251st and onwards in terms of full market capitalisation, as per the official SEBI and AMFI classification. These companies are generally smaller in size compared to large-cap and mid-cap firms but offer higher growth potential due to their ability to expand rapidly in emerging sectors and untapped markets.
Small cap funds come with higher volatility and higher return potential, making them suitable for investors with a long-term investment horizon and a higher risk appetite. SEBI mandates that small cap funds must invest at least 65% of their portfolio in small cap stocks, ensuring focused exposure to this segment.
(Source: SEBI/AMFI classification)
Small cap mutual funds have delivered some of the highest long-term returns in the Indian equity market. Below is a list of the top 10 best small cap mutual funds in India 2025 ranked by their annualised 5-year returns.
| 10 Best Small Cap Mutual Funds (2025) | 5Yr Return |
|---|---|
| 1. Quant Small Cap Direct Growth | 433.3 |
| 2. Nippon India Small Cap Direct Growth | 382.3 |
| 3. Bandhan Small Cap Direct Growth | 371.1 |
| 4. HSBC Small Cap Direct Growth | 343.9 |
| 5. Tata Small Cap Fund Direct Growth | 341.4 |
| 6. Bank of India Small Cap Direct Growth | 337.3 |
| 7. Invesco India Smallcap Direct Growth | 334.2 |
| 8. HDFC Small Cap Fund Direct Growth | 333.2 |
| 9. Edelweiss Small Cap Direct Growth | 331.5 |
| 10. Franklin India Smallcap Direct Growth | 326.7 |
Below are concise overviews for each of the top Small Cap Mutual Funds in (Direct Growth Plans), updated with the latest data for trust and clarity:
Quant Mutual Fund is one of the best small cap mutual fund under the Equity Mutual Fund Scheme. Investors were allowed to access this programme on April 15, 1996. The current fund manager of the Quant Small Cap Fund Direct Plan-Growth fund is Pushpa Rai.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -7.5 | 107.4 | 433.3 |
Nippon India Mutual Fund introduced the Equity Mutual Fund Scheme Nippon India Small Cap Fund Direct-Growth, which is one of the best small-cap mutual fund in India 2025. Investors were eligible to access this plan on June 30, 1995. The current fund manager of the Nippon India Small Cap Fund Direct Growth fund is Samir Rachh, Dhrumil Shah.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -5.7 | 99.1 | 382.3 |
Bandhan Mutual Fund launched the Bandhan Small Cap Fund — Direct Plan (Growth) as a focused equity scheme. The fund debuted in July 2020 and is currently managed by Soumen Kundu, who brings over 15 years of experience in managing small-cap portfolios.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| 5.7 | 131.2 | 371.1 |
HSBC Mutual Fund launched the HSBC Small Cap Fund — Direct Plan (Growth) on 12 May 2014, targeting emerging companies in the small-cap universe under the BSE SmallCap 250 TRI benchmark ⸺ aligning with SEBI classification for small caps.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -5.8 | 85.2 | 343.9 |
Tata Mutual Fund introduced the Tata Small Cap Fund Direct-Growth equity mutual fund scheme. Investors were eligible to access this plan on June 30, 1995. The Tata Small Cap Fund Direct-Growth fund's current fund manager is Chandraprakash Padiyar.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -0.1 | 100.6 | 341.4 |
The Bank of India Mutual Fund introduced the Bank of India Small Cap Fund Direct-Growth equity mutual fund scheme. Investors were allowed to access this plan on March 31, 2008. Currently serving as the fund manager for the Bank of India Small Cap Fund Direct Growth fund is Ajay Khandelwal.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -1.6 | 91.9 | 337.3 |
An equity mutual fund scheme called Invesco India Smallcap Fund Direct Growth was introduced by Invesco Mutual Fund. Investors were allowed to access this plan on July 24, 2006. The current fund manager of the Invesco India Smallcap Fund Direct Growth fund is Taher Badshah.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| 4.7 | 108.3 | 334.2 |
HDFC Mutual Fund launched the HDFC Small Cap Fund — Direct Plan (Growth) on 1 January 2013. It follows SEBI guidelines by investing at least 65% in small-cap stocks, focusing on companies ranked 251st further in market capitalisation.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| 1.1 | 99.4 | 333.2 |
The Edelweiss Mutual Fund introduced the Edelweiss Small Cap Fund Direct Growth Equity Mutual Fund Scheme. Investors were allowed to access this plan on April 30, 2008. Currently serving as the Edelweiss Small Cap Fund Direct Growth fund's fund manager is Harshad Patwardhan.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| 0.6 | 87.6 | 331.5 |
Franklin Templeton Mutual Fund launched the Franklin India Smaller Companies Fund as an open-ended small-cap scheme on 1 January 2013, later converting to open-end in 2011. It adheres to SEBI norms by investing at least 65% in small-cap stocks.
Returns:
| 1Y Return (%) | 3Y Return (%) | 5Y Return (%) |
|---|---|---|
| -7.5 | 98.6 | 326.7 |
Focusing on stability in the long run, the 5 Top Small Cap mutual funds for the long term offer a blend of dynamism and growth with 10 yr Highest Growth.
| Best Mutual Funds for the long term | 10Yr Return |
|---|---|
| 1. Nippon India Small Cap Direct Growth | 513.72% |
| 2. Quant Small Cap Fund | 482.31% |
| 3. SBI Small Cap Fund Direct Growth | 412.14% |
| 4. HSBC Small Cap Fund Dir Gr | 411.32% |
| 5. HDFC Small Cap Fund Direct Growth | 408.10% |
When it comes to taxes and small-cap mutual funds, there are a few important things to consider. Here's what you need to know:
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In 2025, small-cap mutual funds remain one of the most rewarding yet high-risk investment categories in the Indian market. Regulated under SEBI’s small-cap definition (companies ranked 251st and beyond by market capitalisation), these funds have historically delivered strong returns during economic expansion cycles. However, they are also more sensitive to market fluctuations, making them suitable only for investors with a long-term horizon and the ability to withstand short-term volatility.
The best Small-cap Mutual funds in India are Quant Small Cap, Bank of India Small Cap, Nippon India Small Cap, Edelweiss Small Cap, and Canara Robeco Small Cap, which are known for their consistent and high-return mutual funds in India.
Small-cap mutual funds are investment vehicles that focus on companies with small market capitalisations, typically between ₹2,000 crores and ₹10,000 crores. These funds target smaller, often more dynamic, companies with significant growth potential.
Investing in small-cap mutual funds can offer high growth potential, especially during periods of economic recovery. Small-cap companies often innovate quickly and can capitalise on new opportunities, making them attractive for long-term growth.
The top-performing small-cap mutual funds for investment in 2025 are :
1. Bandhan Small Cap Direct Growth
2. Mahindra Manulife Small Cap Direct Growth
3. ITI Small Cap Direct Growth
4. Quant Small Cap Direct Growth
5. Nippon India Small Cap Direct Growth
The primary risks include higher volatility, market sensitivity, longer investment horizons, and lower liquidity. Small-cap stocks can experience significant price swings and may be more vulnerable during market downturns.
When choosing a small cap mutual fund, consider factors such as past performance, expense ratio, fund manager's expertise, and the fund's portfolio composition. Ensure the fund aligns with your investment goals and risk tolerance.
The minimum investment required can vary by fund. Typically, it ranges from as low as ₹100 to ₹1,000 for lump sum investments. Always check the specific requirements of the fund you are interested in.
