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Five best small-cap mutual fund schemes for investors with a strong risk appetite to boost their returns in the ongoing month of September.
What are small-cap mutual funds and who should invest in them? (Representative Image)
Small-cap mutual funds are paying investors good dividends. Investing in stocks of very small companies, these mutual funds provided over 26.38 per cent returns in 2024 and once again attracted a wider set of investors in July 2025, receiving an inflow of Rs 6,484 crore in the market.
Amid higher valuations and recent volatility in the market, many investors are anticipating a change in trend for the small-cap section. Mutual fund managers and financial advisors believe investors can continue to invest in small-cap schemes in a staggered manner to create wealth over a long period.
For beginners, Small-Cap Mutual Funds are mutual fund schemes that invest in small companies or their stocks. As per the mandate by the Securities and Exchange Board of India (SEBI), small-cap schemes must operate in companies ranked below the 250 in terms of market capitalisation. Also in the mandate, these schemes are directed to invest at least 65 per cent in small-cap stocks.
Since these small companies are more affected by the market fluctuations than established business leaders in the large and mid-cap segments, investing in them is flirting with risks. Extremely volatile in the short term, small cap schemes are recommended for aggressive and long-term investors who have a wealth of experience in the market and a high risk appetite.
Why Then Do Investors Opt For Small-Cap Mutual Funds?
Despite the heavy risk element, small-cap mutual funds are attracting investors and enjoying a massive inflow in the financial market. That is because such schemes also have the potential to provide very high returns to long-term investors. Over the last 10 years, the small-cap schemes have provided an average return of over 19 per cent to investors. But to enjoy such great returns, one has to be prepared to stand firm in the market despite the risks and fluctuations involved.
Five Best Small-Cap Mutual Fund Schemes
According to the Economic Times, picking winners in the small-cap segment is not easy. Many of these companies are little-known and lack proper research. Some have questionable management that can make false claims. At times, company heads and market operators even push up prices artificially. As a result, the market often rewards or punishes these companies in extreme ways.
Based on certain factors such as the mean rolling returns, consistency in the last three years, the downside risks, outperformance and asset size, these are the five best small-cap mutual fund schemes that long-term investors with a stomach to fight market volatility can opt for:
Axis Small Cap Fund
SBI Small Cap Fund
Kotak Small Cap Fund
Nippon India Small Cap Fund
Motilal Oswal Small Cap Fund
A team of writers at News18.com bring you stories on what’s creating the buzz on the Internet while exploring science, cricket, tech, gender, Bollywood, and culture.
A team of writers at News18.com bring you stories on what’s creating the buzz on the Internet while exploring science, cricket, tech, gender, Bollywood, and culture.
Delhi, India, India
September 06, 2025, 10:40 IST
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