Small cap mutual funds offer a chance to diversify your investment portfolio with companies having high growth potential. These funds focus mainly on small firms whose market capitalisations typically are under £50m. They are of course riskier than big capital funds, but they also promise great returns in the long run.
Collaboration with a qualified mutual fund investment planner can help manage this high-risk, high-return corner of the market to great effect. A professional advisor can analyze your risk tolerance, investment horizon, and financial goals to recommend small cap funds that align with your overall investment strategy.
Small caps in the Indian equity market have demonstrated quite an impressive resilience and potential for growth, especially in the past few years. Now that we are deeper into 2025, there are a few small cap funds that have shown some attractive numbers that you might want to consider if you have the necessary risk tolerance as an investor. This in-depth guide will help you to quickly determine which small cap funds to choose for your equity portfolio, and list the top 10 best small cap funds up to April 2025.
How to Choose the Right Small Cap Mutual Fund
Selecting the right small cap mutual fund requires careful consideration of several key factors:
Performance Metrics
When evaluating small cap funds, it’s crucial to examine their performance across different time frames:
- 1-Year Returns: Provides insight into recent performance and how the fund has navigated current market conditions
- 3-Year Returns: Offers a more balanced view of performance across different market cycles
- 5-Year Returns: Shows long-term consistency and the fund’s ability to weather various market conditions
Remember that past performance doesn’t guarantee future results, but consistent outperformance relative to the benchmark index (usually the Nifty Smallcap 250) is a positive indicator.
Assets Under Management (AUM)
The fund’s AUM indicates its size and can impact its agility in the market. While larger AUMs may provide stability, smaller AUMs can sometimes allow for more flexibility in the small cap space where liquidity can be a concern.
Fund Manager Track Record
The experience and track record of the fund manager are crucial considerations. Look for managers with:
- Extensive experience managing small cap portfolios
- Consistent performance across different market cycles
- A clear investment philosophy that aligns with the fund’s objectives
Portfolio Allocation
Examine how the fund allocates its assets across:
- Different sectors (diversified vs. sector-focused)
- Market capitalization ranges (pure small cap vs. some mid-cap exposure)
- Cash holdings (higher cash positions might indicate a defensive stance)
Expense Ratio and NAV
The expense ratio directly impacts your returns. Lower expense ratios are generally preferable, though they shouldn’t be the sole deciding factor. Also, consider:
- Net Asset Value (NAV) trends
- Exit loads and other fees
- Tax implications based on your holding period
Top 10 Small Cap Mutual Funds to Invest in April 2025
Nippon India Small Cap Fund
Overview & Objective
Nippon India Small Cap Fund aims to generate long-term capital appreciation by investing predominantly in equity and equity-related instruments of small cap companies. The fund follows a bottom-up approach to stock selection, focusing on companies with strong fundamentals, good management, and growth potential.
Performance
- 1-Year Return: 28.7%
- 3-Year Return: 25.4% (CAGR)
Fund Details
- Fund Manager: Samir Rachh (8+ years managing this fund)
- AUM: ₹37,850 crores
- Risk Factor: Very High
- Expense Ratio: 1.06% (Direct Plan)
The fund has consistently outperformed its benchmark by identifying undervalued small cap companies with strong growth potential. Its well-diversified portfolio across sectors like industrials, chemicals, and consumer discretionary has contributed to its robust performance.
SBI Small Cap Fund
Overview & Objective
SBI Small Cap Fund seeks to generate income and long-term capital appreciation by investing primarily in a diversified portfolio of equity and equity-related securities of small cap companies. The fund employs a blend of top-down and bottom-up approaches to identify promising investment opportunities.
Performance
- 1-Year Return: 24.3%
- 3-Year Return: 23.8% (CAGR)
Fund Details
- Fund Manager: R. Srinivasan
- AUM: ₹21,450 crores
- Risk Factor: Very High
- Expense Ratio: 0.93% (Direct Plan)
This fund has gained recognition for its disciplined investment approach and focus on quality small cap companies with robust business models. Its relatively moderate portfolio churn rate reflects the manager’s conviction in selected stocks.
Kotak Small Cap Fund
Overview & Objective
Kotak Small Cap Fund aims to generate capital appreciation from a diversified portfolio of equity and equity-related securities by predominantly investing in small cap companies. The fund focuses on businesses with sustainable competitive advantages and reasonable valuations.
Performance
- 1-Year Return: 26.1%
- 3-Year Return: 24.2% (CAGR)
Fund Details
- Fund Manager: Pankaj Tibrewal
- AUM: ₹15,780 crores
- Risk Factor: Very High
- Expense Ratio: 0.99% (Direct Plan)
The fund has demonstrated strong risk-adjusted returns through its focus on quality companies with scalable business models. Its emphasis on companies with strong corporate governance has helped mitigate some of the risks typically associated with small cap investments.
Quant Small Cap Fund
Overview & Objective
Quant Small Cap Fund seeks to deliver superior risk-adjusted returns by investing primarily in small cap companies. The fund utilizes a data-driven investment approach that combines fundamental analysis with quantitative models to identify promising investment opportunities.
Performance
- 1-Year Return: 32.5%
- 3-Year Return: 29.7% (CAGR)
Fund Details
- Fund Manager: Sandeep Tandon and team
- AUM: ₹12,560 crores
- Risk Factor: Very High
- Expense Ratio: 1.16% (Direct Plan)
This fund has been one of the top performers in the small cap category, thanks to its dynamic asset allocation strategy and quantitative approach to stock selection. Its ability to identify emerging themes early has contributed significantly to its outperformance.
Axis Small Cap Fund
Overview & Objective
Axis Small Cap Fund aims to generate long-term capital appreciation by investing predominantly in equity and equity-related instruments of small cap companies. The fund focuses on businesses with sustainable competitive advantages, good growth prospects, and reasonable valuations.
Performance
- 1-Year Return: 22.8%
- 3-Year Return: 21.9% (CAGR)
Fund Details
- Fund Manager: Anupam Tiwari
- AUM: ₹14,320 crores
- Risk Factor: Very High
- Expense Ratio: 0.88% (Direct Plan)
The fund has built a reputation for its quality-focused approach and emphasis on capital preservation during market downturns. Its relatively lower volatility compared to peers makes it an attractive option for investors seeking their first exposure to the small cap segment.
HDFC Small Cap Fund
Overview & Objective
HDFC Small Cap Fund aims to generate capital appreciation through investments primarily in small cap companies. The fund adopts a value-oriented approach, focusing on businesses trading below their intrinsic value with potential for re-rating.
Performance
- 1-Year Return: 25.8%
- 3-Year Return: 24.5% (CAGR)
Fund Details
- Fund Manager: Chirag Setalvad
- AUM: ₹18,940 crores
- Risk Factor: Very High
- Expense Ratio: 0.95% (Direct Plan)
This fund stands out for its disciplined investment approach and focus on companies with strong balance sheets and cash flows. Its preference for established small caps over speculative ones has helped deliver consistent returns across market cycles.
ICICI Prudential Small Cap Fund
Overview & Objective
ICICI Prudential Small Cap Fund seeks to generate long-term capital appreciation by predominantly investing in equity and equity-related securities of small cap companies. The fund employs a bottom-up stock selection process with emphasis on companies showing improving business metrics.
Performance
- 1-Year Return: 27.3%
- 3-Year Return: 26.1% (CAGR)
Fund Details
- Fund Manager: Rohit Singhania
- AUM: ₹16,780 crores
- Risk Factor: Very High
- Expense Ratio: 1.02% (Direct Plan)
The fund has demonstrated strong performance by identifying small companies with significant growth potential before they attract broader market attention. Its sector-agnostic approach allows it to capture opportunities across various segments of the economy.
Tata Small Cap Fund
Overview & Objective
Tata Small Cap Fund aims to generate long-term capital appreciation by investing predominantly in equity and equity-related instruments of small cap companies. The fund focuses on identifying potential future winners through fundamental research and company visits.
Performance
- 1-Year Return: 29.2%
- 3-Year Return: 27.3% (CAGR)
Fund Details
- Fund Manager: Chandraprakash Padiyar
- AUM: ₹13,450 crores
- Risk Factor: Very High
- Expense Ratio: 0.97% (Direct Plan)
This relatively newer entrant in the small cap category has quickly established itself as a strong performer. The fund manager’s emphasis on company management quality and business sustainability has contributed to its impressive track record.
Canara Robeco Small Cap Fund
Overview & Objective
Canara Robeco Small Cap Fund aims to generate capital appreciation by investing predominantly in equity and equity-related instruments of small cap companies. The fund follows a growth-at-reasonable-price (GARP) strategy to identify promising investment opportunities.
Performance
- 1-Year Return: 23.9%
- 3-Year Return: 22.5% (CAGR)
Fund Details
- Fund Manager: Vishal Mishra
- AUM: ₹9,870 crores
- Risk Factor: Very High
- Expense Ratio: 0.94% (Direct Plan)
The fund has delivered consistent performance through its balanced approach that emphasizes both growth potential and valuation attractiveness. Its relatively moderate concentration in top holdings helps mitigate stock-specific risks.
Edelweiss Small Cap Fund
Overview & Objective
Edelweiss Small Cap Fund seeks to generate long-term capital appreciation by predominantly investing in equity and equity-related securities of small cap companies. The fund employs a research-intensive approach to identify businesses with scalable models and sustainable competitive advantages.
Performance
- 1-Year Return: 26.7%
- 3-Year Return: 25.8% (CAGR)
Fund Details
- Fund Manager: Trideep Bhattacharya
- AUM: ₹7,920 crores
- Risk Factor: Very High
- Expense Ratio: 0.98% (Direct Plan)
This fund has gained attention for its strong performance driven by a focus on identifying emerging business opportunities and secular growth themes. Its emphasis on companies with improving earnings quality has helped deliver attractive risk-adjusted returns.
Conclusion
Small capitalization mutual funds provide strong possibilities of earning growth for investors who are willing to bear more volatile and are looking at higher returns. The small cap category has seen strong performance during previous periods, however, investors should consider these funds with a long investment horizon (preferably 5+ years) along with risk controls in place.
Investors in the East can take advantage of things like reliability and trustworthiness of a mutual fund agent in Kolkata who can give inputs specific to the local investment opportunities and the market scenario. A qualified mutual fund agent in Kolkata can help you navigate the complexities of small cap investing while ensuring your portfolio remains aligned with your overall financial goals.
Keep in mind that small cap investing should generally comprise only a portion of your overall investment plan based on your risk tolerance, time horizon, and financial goals. No matter which fund you select, active management to periodically rebalance the portfolio is critical to properly managing risk in the fast-moving market segment.
The funds discussed here present the top small cap choices in April 2025, but investors should conduct their own research or consult with a mutual fund investment planner before making investment decisions. With the right approach and professional guidance, small cap mutual funds can be a valuable addition to a well-diversified investment portfolio.
