Mutual Funds · Small cap
Small-Cap Funds
SEBI mandate: 65%+ in stocks ranked 251 and beyond. The highest-return + highest-risk equity category. 3-yr CAGR can be 25-35%; drawdowns can hit 40-50%. Suitable for 10+ year horizons + strong stomach. Cap allocation at 15-20% of equity.
Who needs this
Aggressive long-term investors with 10+ year horizon. Already have large-cap + mid-cap core. Comfortable with 40%+ drawdowns.
Category at a glance
Min small-cap allocation
65%
SEBI mandate
Stock universe
Rank 251+
By market cap
Typical 3-yr CAGR
25-35%
Category median; high variance
Expense ratio (direct)
0.5-1.5%
Volatility (std dev)
28-35%
Highest in equity
Max drawdown
40-50%
Bear-market scenario
Top 5 small-cap funds
Source: AMFI + AMC factsheets · refreshed quarterly
| Fund | AMC | Expense % | 3y CAGR |
|---|---|---|---|
| Nippon India Small Cap | Nippon | 0.71% | 28.4% |
| Quant Small Cap | Quant | 0.68% | 33.2% |
| Axis Small Cap | Axis | 0.51% | 24.6% |
| HDFC Small Cap Fund | HDFC | 0.74% | 26.1% |
| SBI Small Cap Fund | SBI | 0.66% | 25.9% |
Key decisions
- Q1
Should I invest in small-cap?
Only after 80%+ of your equity is in large + mid. Cap small-cap at 15-20% of equity. Use ONLY SIP, never lump-sum.
- Q2
Index or active?
Active — small-cap is where active management adds the most alpha. Best active small-caps beat Nifty Smallcap 250 by 500-800 bps over 5 years.
- Q3
How long to hold?
Minimum 7 years; ideally 10+. Selling within 3 years often crystallises drawdowns from bear markets.
SEBI rules + scheme specifics
- Small-cap = stocks ranked 251 and beyond by market cap.
- Min 65% in small-cap; max 35% elsewhere.
- Benchmark: Nifty Smallcap 250 TRI.
- Most volatile equity category — only suitable for long-horizon investors.
Calculators + tools
All mutual funds
Recommended →Free MF Overlap Analyzer — see if your funds duplicate