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Many investors can invest in high-growth companies through small-cap mutual funds while staying under the radar.
Over five years, the right fund can significantly outperform broader indices, making small funds an appealing choice for long-term investments.
However, Small-cap investments are highly affected by market sentiment, changing economic conditions, and company growth.
December offers some exciting opportunities for small-cap mutual funds in India. Many high-value small-cap funds look promising for next-cycle growth, driven by restructuring and valuation. Small-cap funds have strong growth potential if carefully selected and held for several years, compared with balanced and large-cap funds.
Quant Small Cap Fund still sets the standard as one of the most impressive small-cap funds in 2025, with a five-year compounding return significantly above benchmark indices. This fund systematically invests across emerging, fast-growing companies with diversified sector exposure. While short-term performance can be choppy, its long-term track record and active management make it a solid choice for investors.
Also read: Top Mutual Fund SIP for November 2025
Nippon India Small Cap Fund stands out for its size, stability, and strong performance track record. With a diversified portfolio and strong fund management, the fund balances high growth potential with a relatively lower expense ratio compared to many peers. Over five years, it has delivered attractive returns, making Nippon India a reliable option for those looking to combine small-cap growth with a measure of stability.
Invesco India Smallcap Fund is a good pick for investors seeking exposure to small-cap growth, featuring carefully selected companies with long-term scalability. Its consistent five-year returns and lower expense ratio are attractive for those planning a systematic investment through SIPs. Given its small-cap volatility, the fund suits investors with a long horizon who can tolerate market ups and downs.
Also read: Top International Mutual Funds in India 2025
Bandhan Small Cap Fund has attracted clients through its medium-term performance. Its portfolio is geared toward small-cap firms with growth potential, and over a multi-year horizon, the Bandhan Small Cap Fund has delivered competitive returns relative to benchmarks. For investors seeking funds that could benefit from a favorable small-cap cycle, Bandhan offers an interesting proposition.
Small-cap mutual funds can accelerate your growth, but it depends primarily on risk tolerance, patience, and a long-term commitment. NipponSmallCap has impressive performance and diversified strategies. On the other hand, Invesco and Bandhan stand out for their balanced risk-reward trade-offs for medium- to long-term investments. These funds can significantly enhance the growth portfolio if seeking a 5-10-year investment or longer.
Why should I consider small-cap funds now?
Small-cap funds often deliver higher growth because investing in smaller companies can enable them to scale rapidly. In 2025 conditions, valuations and macroeconomic changes may provide entry points.
How long should I hold small-cap funds?
Ideally, 5–10 years. Short-term volatility is common; long-term holding smooths out ups and downs and maximizes compounding benefits.
Is investing in small-cap funds a matter of risk?
Yes, they are more volatile than large-cap or diversified funds. They can deliver maximum returns while taking on higher risk.
Which is better for investment: SIP or lump sum?
A SIP (systematic investment plan) can minimize volatility and decrease risks.
Is there any guarantee of high returns in small-cap funds?
No, the small-cap fund carries high risk and is affected by market conditions, so there is no guarantee of future returns.
