Bandhan Small Cap Fund delivered the highest 5-year CAGR at 25.16%.
Nippon India Small Cap Fund holds the largest AUM at Rs. 61,808.85 crore.
DSP Small Cap Fund posted the strongest 1-year return at 23.13%.
Small-cap mutual funds attract many investors as these funds hold shares of small companies with high growth potential. These firms are at an early stage of business growth and carry higher risk, but they also offer strong return potential over long periods. A patient investor with a time horizon of seven to ten years may create meaningful wealth by choosing the right fund.
The small-cap category has recently gained attention after fresh inflows entered the segment. Experts believe long-term discipline is important as small-cap stocks usually face sharp market swings.
The funds below stand out with a strong 5-year CAGR, solid fund size, and reasonable expense ratio.
Bandhan Small Cap Fund holds the top position in the list with a 5-year CAGR of 25.16%. The fund also delivered a strong 3-year CAGR of 33.32% and a 1-year return of 20.20%. The AUM stands at Rs. 20,129.67 crore, while the expense ratio is 0.51%.
This fund gained strong attention for its consistent long-term performance. Market reports also placed the scheme among equity funds with excellent CAGR over recent years.
It suits aggressive investors who want to generate massive wealth over a long period. Strong returns across various time frames show decent stock selection and effective portfolio management.
Invesco India Smallcap Fund delivered a 5-year CAGR of 24.37%. The scheme posted a 3-year CAGR of 27.23% and a 1-year return of 18.17%. The fund manages assets worth Rs. 9,207.58 crore with an expense ratio of 0.52%.
The fund’s balanced risk and returns make it popular. Several market trackers highlighted the scheme among top-performing small-cap funds in India.
The portfolio usually focuses on quality businesses with long growth runways. Investors searching for stable long-term small-cap exposure may consider this scheme.
Also Read - Top Oil Stocks to Invest in 2026 and How to Get Started
Nippon India Small Cap Fund is one of the biggest small-cap funds in India with an AUM of Rs. 61,808.85 crore. The fund generated a 5-year CAGR of 23.70%, while the 3-year CAGR reached 22.92%. The 1-year return stood at 15.30%, and the expense ratio at 0.67%.
The large asset base shows high investor confidence. The scheme also earned recognition for strong long-term performance across both five-year and seven-year periods.
The fund carries slightly lower recent returns compared to some peers, but the long-term track record still looks impressive. Investors who prefer experienced fund management teams place this scheme on the watchlist.
Quant Small Cap Fund posted a 5-year CAGR of 22.69%. The scheme delivered a 3-year CAGR of 22.89% and a 1-year return of 13.49%. The fund size stands at Rs. 25,820.99 crore, while the expense ratio remains at 0.83%.
Quant Mutual Fund follows a dynamic investment style with active portfolio changes. This approach has helped the fund deliver sharp upside during strong market phases.
The scheme suits investors with high risk tolerance and a long investment horizon. The long-term CAGR remains among the best in the category.
Bank of India Small Cap Fund emerged as a surprise performer in recent years. The fund delivered a 5-year CAGR of 22.22%. The 3-year CAGR came at 24.91%, while the 1-year return touched 21.57%. The expense ratio is low at 0.51%, and the AUM stands at Rs. 1,770.44 crore.
Market reports highlighted the fund for its strong performance and attractive cost structure.
The smaller AUM allows better flexibility in stock selection. This factor may help fund managers identify hidden opportunities in emerging businesses.
HSBC Small Cap Fund generated a 5-year CAGR of 21.68%. The fund posted a 3-year CAGR of 19.67% and a 1-year return of 14.57%. The AUM stands at Rs. 16,393.56 crore, while the expense ratio is 0.77%.
The scheme focuses on diversified exposure across sectors. Long-term consistency is one of its strengths. Investors looking for a globally managed fund house with Indian small-cap exposure may find this option attractive.
Edelweiss Small Cap Fund offered a 5-year CAGR of 21.48%. The fund generated a 3-year CAGR of 21.76% and a 1-year return of 15.31%. The AUM stands at Rs. 5,107.67 crore, while the expense ratio is low at 0.47%.
A lower expense ratio helps investors keep more returns over long periods. Reports also highlighted the scheme among strong-performing small-cap funds. The fund suits long-term investors who prefer cost-efficient equity schemes.
Franklin India Small Cap Fund delivered a 5-year CAGR of 21.41%. The 3-year CAGR reached 21.15%, while the 1-year return came at 11.38%. The expense ratio is 0.96%, and the AUM stands at Rs. 11,724.35 crore.
Franklin Templeton carries a long history in equity fund management. The fund focuses on businesses with strong fundamentals and sustainable growth potential.
The recent one-year performance looks lower compared to peers, but the long-term return profile is still healthy.
DSP Small Cap Fund generated a 5-year CAGR of 21.12%. The scheme delivered a 3-year CAGR of 23.02% and a strong 1-year return of 23.13%. The AUM stands at Rs. 15,300.48 crore, while the expense ratio remains at 0.80%.
The fund also stayed among the top-performing small-cap schemes during strong market rallies.
The strong recent return shows healthy momentum inside the portfolio. Investors seeking aggressive growth potential may find this scheme attractive for long-term SIP investment.
LIC MF Small Cap Fund delivered a 5-year CAGR of 21.04%. The fund posted a 3-year CAGR of 22.12% and a 1-year return of 19.09%. The expense ratio is 1.05%, while the AUM stands at Rs. 552.21 crore.
The fund remains smaller compared to major competitors. However, long-term returns still look competitive. Smaller schemes sometimes gain an advantage because fund managers can move quickly across opportunities in the market.
Also Read - Best Gilt Mutual Funds in April 2026 for Stable and Secure Returns
Small-cap funds offer strong wealth creation potential across long investment periods. However, these funds also face higher volatility during market corrections. This emphasizes the importance of patience and discipline.
Bandhan Small Cap Fund, Invesco India Smallcap Fund, and Nippon India Small Cap Fund stand out with their strong long-term CAGRs and consistent track record. Bank of India Small Cap Fund and DSP Small Cap Fund also look attractive with strong recent returns.
A SIP approach often works better in the small-cap category because regular investment helps handle market ups and downs more smoothly. Investors with a long horizon and high risk appetite may benefit the most from this category.
1. Which small-cap fund gave the highest 5-year CAGR in May 2026?
Bandhan Small Cap Fund delivered the highest 5-year CAGR of 25.16% among the listed small-cap mutual funds. Its strong long-term performance was supported by growth-oriented investments in emerging companies and favorable market conditions for small-cap stocks.
2. Are small-cap funds risky?
Yes, small-cap funds carry higher market risk because they primarily invest in smaller companies that can experience greater price volatility and business uncertainty. However, these funds also offer strong long-term growth potential, making them suitable for investors with higher risk tolerance and longer investment horizons.
3. Which fund has the largest AUM in the category?
Nippon India Small Cap Fund has the largest assets under management (AUM) in the category at Rs. 61,808.85 crore. Its large investor base, strong historical performance, and diversified portfolio have helped it become one of the most widely followed small-cap mutual funds in India.
4. Is SIP suitable for small-cap funds?
Yes, Systematic Investment Plans (SIPs) are considered suitable for small-cap funds because they help investors manage market volatility through regular investing. SIPs support disciplined investment habits and allow investors to benefit from rupee cost averaging during periods of market fluctuations over the long term.
5. Which small-cap fund gave the best 1-year return?
DSP Small Cap Fund delivered the best 1-year return of 23.13% among the listed funds. The fund benefited from strong performance in select high-growth small-cap companies, helping it generate strong short-term returns despite ongoing market volatility in the broader segment.