Best Small Cap Fund in India 2025

Small-cap Funds are mutual funds that primarily invest in companies with market capitalizations below ₹5000 crores. These companies are ranked below 250 in terms of market capitalization. 

Investors get attracted to the high returns offered by small-cap funds. However, you must invest in small-cap funds for the long term. Let us read about the best small-cap fund in India in 2025. Keep reading!

List of Small Cap Funds in India in 2025

Below is the list of Small Cap Funds in India in 2025:

Disclaimer: The information provided on the above stocks is for informational purposes only. It is crucial to conduct thorough research before making any investment decisions regarding these stocks. We do not recommend trading any stocks without comprehensive research and professional financial advice. Always consult with a certified financial advisor to ensure informed and appropriate investment choices. 

Table of Content

1. List of Small Cap Funds in India in 2025
2. An overview of Small Cap Fund
3. What is Small Cap Fund?               
4. Factors to consider before investing in Small Cap Funds
5. Advantages of Small Cap Funds
6. Risk of Investing in Small Cap Funds
7. Who Should Invest in Small Cap Funds?

An overview of Small Cap Fund

1. Nippon India Small cap fund Direct Growth Plan - Bonus option

Launched by Nippon India Mutual Fund, Nippon India Small Cap Fund Direct Bonus is Equity Mutual Fund Scheme. On 30 June 1995, the Nippon India Small Cap Fund was made available to investors with the investment objective of generating long-term capital appreciation. 

2. Nippon India Small Cap Fund Direct-Growth Plan

Launched by Nippon India Mutual Fund, Nippon India Small Cap Fund Direct is Equity Mutual Fund Scheme. On 30 June 1995, the Nippon India Small Cap Fund was made available to investors with the investment objective of generating long-term capital appreciation. 

3. HDFC Small Cap Fund Direct-Growth Plan

Launched by HDFC Mutual Fund, HDFC Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 10, Dec 1999, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

4. SBI Small Cap Fund Direct – Growth Fund

Launched by SBI Mutual Fund, SBI Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 29, June 1987, the open-ended scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

5. Quant Small Cap Fund Direct – Growth Fund

Launched by Quant Mutual Fund, Quant Small Cap Fund Direct-Growth Fund is an Equity Mutual Fund Scheme. On 15, Apr 1996, the scheme was made available to investors with the investment objective of generating long-term capital appreciation with a well-diversified portfolio.

6. Axis Small Cap Fund Direct – Growth Fund

Launched by Axis Mutual Fund, Axis Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 04, Sept 2009, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

7. Kotak Small Cap Fund Direct – Growth Fund

Launched by Kotak Mahindra Mutual Fund, Kotak Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 05, Aug 1994, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

8. HSBC Small Cap Fund Direct – Growth Fund

Launched by HSBC Mutual Fund, HSBC Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 27, May 2002, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

9. DSP Small Cap Fund Direct – Growth Fund 

Launched by DSP Mutual Fund, DSP Small Cap Fund Direct Growth is an Equity Mutual Fund Scheme. On 16, Dec 1996, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

10. Franklin India Smaller Companies Fund Direct – Growth Fund

Launched by Franklin Templeton Mutual Fund, Franklin India Smaller Companies Direct Fund Growth is an Equity Mutual Fund Scheme. On 10, Dec 1999, the scheme was made available to investors with the investment objective of generating long-term capital appreciation. 

What is Small Cap Fund?               

Companies that are ranked from 251 onwards with market capitalization below 5000 are known as small-cap companies. The mutual funds that hold these stocks are called small cap funds. These companies generally don’t have a long track record. 

Factors to consider before investing in Small Cap Funds

Below are the factors to consider before investing in small cap funds: 

• Due to its highly volatile nature, investing in small cap mutual is riskier as compared to mid or large-cap mutual funds. On a broad range, the net asset value of small-cap mutual funds fluctuates.
• With a combination of good strategy and observation, Small cap mutual funds can deliver high performance. However, due to the volatile nature of the small-cap, it is advised to invest with an experienced investor.
• Investors who are looking for a short-term investment should not focus on investing in small cap funds. Generally, small cap funds are preferred by investors who want to invest for longer tenure. 

Advantages of Small Cap Funds

The following are the advantages of investing in small-cap funds: 

• Small-cap funds have high growth potential due to their aggressive growth strategy. This strategy helps in boosting growth significantly over the long term. 
• With diversification, you can ensure that small-cap mutual funds provide better gains when large-cap and mid-cap funds are not performing as per expectations. This helps you maintain a balanced portfolio.
• Fund managers invest in top-performing stocks with high potential to generate returns in the future. This helps in diversifying the portfolio with calculated risk. 

Risk of Investing in Small Cap Funds

While investing in small-cap funds, you must consider the below risk factors: 

• Performance risk: Factors such as stock performance, stock selection, and others determine the performance of small-cap funds. These funds impact the performance which requires timely intervention of fund managers to balance the funds. 
• Volatility: Small cap funds are high volatility in nature, which means prices might change dramatically. You might face losses if the prices drop due to the extremely unstable nature of small-cap funds. 
• Liquidity: there are liquidity concerns as small-cap mutual funds are rarely invested in by institutional investors. This makes it difficult to buy or sell small-cap units in the market. 

Who Should Invest in Small Cap Funds?

If you fall under the below category, you must invest in small-cap funds:

• If you want to diversify your investment then investing small cap along with other investments is a good option. Small funds are risky. Diversifying reduces the overall risk.

• Small cap are riskier than large-cap funds or mid-cap funds. If you are willing to take risks and have a high-risk appetite. Investing in small-cap funds can be a viable option for you. 

• Investment can be long-term or short-term. Considering the small-cap funds' performance and fluctuations, you must invest in small-cap funds for a longer term.