Equity · Category

Best Small Cap Mutual Funds 2026

A small cap fund must keep at least 65% of its portfolio in companies ranked 251st and below by market capitalisation. That is an enormous universe of several thousand companies, most of them thinly traded — which is the source of both the category's return potential and its most underappreciated risk.

The rules, in short

Universe: Ranks 251 and below; Defined by AMFI's half-yearly list, last revised July 2026.
Minimum allocation: 65% in small caps; SEBI category rule.
Tax on gains: 12.5% above ₹1.25 lakh; Long-term capital gains (held over 12 months) under Section 112A. Gains on units held 12 months or less are short-term and taxed at 20%. The ₹1.25 lakh exemption is an annual aggregate across all your equity gains.

All 37 Small Cap funds, ranked

Ordered by three-year annualised return, computed from official AMFI NAV history to a common date. Every fund here follows the same SEBI mandate, so the differences below come from the manager's choices and the fund's costs — not from a difference in what they are allowed to hold.

NAV as of 31 Aug 2026

Category average over 3Y: 17.5% a year across 24 funds with a full record.

#Fund1Y3Y ↓5Yvs catExpense

Median expense ratio in this category: 0.66%. Direct plans cost less than regular plans — the same fund appears once here, on its longest-running plan.

Not enough history to rank

These 13 funds do not yet have a full 3Y NAV record, so ranking them against the funds above would compare different periods.

Abakkus Small Cap Fund BAJAJ FINSERV SMALL CAP FUND Baroda BNP Paribas Small Cap Fund Groww Small Cap Fund Helios Small Cap Fund JM Small Cap Fund Mirae Asset Small Cap Fund Motilal Oswal Small Cap Fund QUANTUM SMALL CAP FUND Samco Small Cap Fund TATA SmallCap Fund The Wealth Company Small Cap Fund TRUSTMF SMALL CAP FUND

Liquidity is the real risk, not volatility

Small cap volatility is visible in any returns chart. The risk that is not visible is liquidity: a fund holding a company that trades a few crore rupees a day cannot exit that position quickly without moving the price against itself. In a broad sell-off, when many investors redeem at once, the fund may have to sell its most liquid holdings first — leaving the remaining investors with a less liquid portfolio.

This is why several small cap funds have at times restricted or suspended lump-sum subscriptions when inflows outran the number of companies they could sensibly deploy into. A fund limiting its own inflows is usually a sign of discipline rather than a problem, but it is a category-specific behaviour worth understanding before investing.

How AMFI decides what counts as large, mid and small cap

AMFI ranks every listed company by average daily full market capitalisation and publishes the list twice a year, in January and July. Ranks 1–100 are large cap, 101–250 are mid cap, and everything from 251 down is small cap. In the July 2026 revision the large-cap cut-off was about ₹1.06 lakh crore and the mid-cap cut-off about ₹33,500 crore. Because the list is redrawn every six months, a stock can move between buckets and funds then have to adjust their holdings to stay within their mandate.

How to read the table below

Returns are annualised and computed from our own AMFI NAV history rather than taken from a fund factsheet, so every fund on this page is measured to the same date on the same basis. The category average is calculated across the same set.

Expense ratio is the annual cost, already deducted from the NAV you see — a fund returning 15% gross at a 1.2% expense ratio shows 13.8%. Direct plans cost less than regular plans because they carry no distributor commission.

Past returns describe what happened; they are not a forecast. Two funds with identical three-year numbers can have reached them through very different levels of volatility.

Frequently asked questions

What counts as a small cap company in India?+

Every listed company ranked 251st or below by average daily full market capitalisation on AMFI's half-yearly list. Unlike large and mid cap, the segment has no lower bound, so it spans several thousand companies of very different sizes and liquidity.

Why do some small cap funds stop accepting lump-sum investments?+

When inflows grow faster than the number of small companies a fund can invest in at sensible prices, deploying that money would force the manager into weaker ideas or into positions too large to exit. Restricting lump sums, while usually still allowing SIPs, is how funds manage that.

How are Small Cap funds ranked on this page?+

By three-year annualised return, computed from official AMFI NAV history to a common date, so every fund is measured on the same basis. Funds without a full three-year record are listed separately rather than ranked against funds that have one.

Are these returns after fees?+

Yes. Returns are calculated from NAV, and the expense ratio is already deducted from NAV daily. The expense-ratio column tells you what that ongoing cost is.

How this page is produced

Every figure above is computed from our own archive of the official AMFI NAV file, going back to 2006, to NAV dated 31 Aug 2026. Nothing here is copied from a factsheet or a third-party summary. The full method is published, including its limitations.

Because every fund here is measured to the same date on the same basis, the column is directly comparable — which a page assembled from individual factsheets is not. Returns are annualised over 3Y and the category average is calculated across the same set of funds shown above. Tax rules summarised on this page are general and current for FY 2026-27 — confirm your own position with a qualified tax adviser.

Written and maintained by Azad Mohammed, who built the pipeline these numbers come out of. Found an error? Tell us — corrections are made and the page rebuilds within the hour.

This page describes what each fund has done. It is not investment advice and not a recommendation to buy or sell any scheme. Arthkar is not a SEBI-registered investment adviser and does not provide or arrange investment advice. Mutual fund investments are subject to market risk; read all scheme related documents carefully.