Synopsis: This article shows 7 best performing small-cap mutual funds that have achieved up to 32% annual returns in the last three years.
Small-cap mutual funds have attracted strong investor interest because they have the potential to deliver high returns over extended periods. They invest in companies that operate in their early or mid-growth stages and have substantial growth potential. The funds experience greater investment success during bullish market conditions because their business growth rates exceed those of large-cap companies. But which funds are currently leading the small-cap category?
What Are Small-Cap Mutual Funds?
Small-cap mutual funds invest in smaller listed companies that fall outside the top 250 by market size. The firms operate at their early development stage, which results in high potential growth, but their stock prices experience greater fluctuations, and their market value faces higher volatility than established companies.
Top 7 Small-Cap Mutual Funds (3-Year Performance Leaders)
1. Bandhan Small Cap Fund
- NAV: ₹52.16
- AUM: ₹20,129.67 Cr
- Expense Ratio: 0.77%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 32.2%
- 3-Year Absolute Return: 131.8%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 32.2%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +12.5 percentage points
2. ITI Small Cap Fund
- NAV: ₹32.66
- AUM: ₹2,492.96 Cr
- Expense Ratio: 1.02%
- Exit Load: 0.50% (within 3 month)
- Performance Snapshot
- 3-Year CAGR: 27.2%
- 3-Year Absolute Return: 103.5%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 27.2%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +7.5 percentage points
3. Mahindra Manulife Small Cap Fund
- NAV: ₹20.83
- AUM: ₹3,820.31 Cr
- Expense Ratio: 1.60%
- Exit Load: 1% (within 3 month)
- Performance Snapshot
- 3-Year CAGR: 26.0%
- 3-Year Absolute Return: 103.6%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 26.0%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +6.3 percentage points
4. Invesco India Smallcap Fund
- NAV: ₹46.86
- AUM: ₹9,207.58 Cr
- Expense Ratio: 1.28%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 25.8%
- 3-Year Absolute Return: 102.1%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 25.8%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +6.1 percentage points
Also read: Bandhan Small Cap Fund vs Invesco India Smallcap Fund: Which Delivered Higher Returns in 3 Years?
5. Bank of India Small Cap Fund
- NAV: ₹54.92
- AUM: ₹1,770.44 Cr
- Expense Ratio: 1.18%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 23.6%
- 3-Year Absolute Return: 89.9%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 23.6%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +3.9 percentage points
6. Union Small Cap Fund
- NAV: ₹58.54
- AUM: ₹1,665.52 Cr
- Expense Ratio: 1.13%
- Exit Load: 1% (within 15 days)
- Performance Snapshot
- 3-Year CAGR: 22.5%
- 3-Year Absolute Return: 82.4%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 22.5%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +2.8 percentage points
7. Nippon India Small Cap Fund
- NAV: ₹192.08
- AUM: ₹61,808.85 Cr
- Expense Ratio: 0.80%
- Exit Load: 1% (within 1 year)
- Performance Snapshot
- 3-Year CAGR: 22.0%
- 3-Year Absolute Return: 82.4%
- Category Comparison (3-Year)
- Fund 3-Year CAGR: 22.0%
- Equity Small Cap Category Average: 19.7%
- Outperformance: +2.3 percentage points
Comparison Table
Note: The NAV, AUM, expense ratio, and the ratios mentioned for the funds are sourced from Groww as of 30th April 2026.
Why Small-Cap Funds Are Trending in 2026
- Small-cap funds are gaining momentum because India is experiencing strong economic growth, which benefits smaller companies and increases their potential to generate profits.
- The category has attracted more funds because retail investors now participate in it to a greater extent.
- The government investment in manufacturing and infrastructure development together with its funding of capital projects has created better growth opportunities for new business ventures.
- Small-cap companies are currently achieving higher earnings growth rates than their large-cap counterparts because market sentiment has improved and liquidity conditions have become more favorable.
Conclusion
Small-cap funds continue to serve as effective methods for creating wealth, with Bandhan Small Cap Fund leading its category through a 32% CAGR. The category shows attractive growth potential; however, investors must approach it with a long-term perspective and the ability to handle market fluctuations.
Written By Ameet S
Disclaimer: The information provided in this article is for educational purposes only and should not be construed as financial advice or investment recommendation. Returns mentioned are based on historical performance and may not be sustained in the future. Mutual fund investments are subject to market risks, including potential loss of capital. Investors are advised to assess their risk appetite and financial goals and to consult a certified financial advisor before investing.
