Best Small Cap Funds to Invest in India in October 2026
What are small cap funds?
A small cap fund is an equity mutual fund that invests mainly in small cap companies. SEBI defines small cap companies as those ranked 251st and below in India by full market capitalisation, and requires a small cap fund to keep at least 65% of its assets in them.
Small cap companies are usually younger and smaller than mid and large companies. Their businesses can grow quickly from a small base, but they are also less established, their shares trade in smaller volumes, and they can fall much further in a downturn than larger companies.
- Total funds
- 27
- Category fund size
- ₹4.66 lakh crore
- Average 1-year return
- 14.06%
- Average 3-year return
- 15.86%
Direct plans, as of 30 September 2026
Top small cap funds to invest in India in October 2026
These are 10 small cap funds for this month, shown in no particular order. Their ranks are available only in the Blacklitt app: tap a fund to see its rank.
| Fund | 1Y return | 3Y return | Expense ratio | Fund size |
|---|---|---|---|---|
 PGIM India Small Cap FundRank: App exclusive | 15.32% | 15.86% | 0.56% | ₹1,794 Cr |
 Quant Small Cap FundRank: App exclusive | 15.95% | 17.25% | 0.62% | ₹35,557 Cr |
 Nippon India Small Cap FundRank: App exclusive | 9.97% | 14.72% | 0.51% | ₹82,580 Cr |
 ITI Small Cap FundRank: App exclusive | 22.17% | 23.70% | 0.45% | ₹3,603 Cr |
 Axis Small Cap FundRank: App exclusive | 10.97% | 15.14% | 0.55% | ₹31,448 Cr |
 Bank Of India Small Cap FundRank: App exclusive | 30.87% | 21.78% | 0.41% | ₹3,307 Cr |
 LIC MF Small Cap FundRank: App exclusive | 17.92% | 18.12% | 0.80% | ₹832 Cr |
 Invesco India Smallcap FundRank: App exclusive | 15.89% | 21.95% | 0.40% | ₹15,744 Cr |
 Union Small Cap FundRank: App exclusive | 23.85% | 17.03% | 0.77% | ₹2,667 Cr |
 Bandhan Small Cap FundRank: App exclusive | 12.63% | 23.65% | 0.35% | ₹34,176 Cr |
Small cap funds returns calculator
See what an investment in one of these funds would have grown to. Choose a fund, a monthly SIP or a one-time lumpsum, an amount and a period.
Between ₹500 and ₹1,00,000.
- Invested
- Worth
- Total investment
- ₹6,00,000
- Profit
- ₹2,74,864
- Current value
- ₹8,74,864
This fund has generated an XIRR of 15.06% over the past 5 years.
See this fund in the appYear-by-year numbers
| Year | Invested | Worth |
|---|---|---|
| 1 | ₹1,20,000 | ₹1,25,016 |
| 2 | ₹2,40,000 | ₹2,76,159 |
| 3 | ₹3,60,000 | ₹5,28,123 |
| 4 | ₹4,80,000 | ₹6,41,196 |
| 5 | ₹6,00,000 | ₹8,74,864 |
Details of the funds on this list
Let's take a closer look at these funds.
PGIM India Small Cap Fund
- Fund Performance
- The PGIM India Small Cap Fund has given 15.86% annualised returns in the past three years and 12.99% in the last five years. In the past year it has returned 15.32%.
- Minimum Investment Amount
- The minimum amount required to invest in PGIM India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
- Expense Ratio and Fund Size
- The direct plan of PGIM India Small Cap Fund charges an expense ratio of 0.56% a year, and the fund's size is ₹1,794 Cr.
Quant Small Cap Fund
- Fund Performance
- The Quant Small Cap Fund has given 17.25% annualised returns in the past three years and 18.85% in the last five years. In the past year it has returned 15.95%.
- Minimum Investment Amount
- The minimum amount required to invest in Quant Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
- Expense Ratio and Fund Size
- The direct plan of Quant Small Cap Fund charges an expense ratio of 0.62% a year, and the fund's size is ₹35,557 Cr.
Nippon India Small Cap Fund
- Fund Performance
- The Nippon India Small Cap Fund has given 14.72% annualised returns in the past three years and 18.37% in the last five years. In the past year it has returned 9.97%.
- Minimum Investment Amount
- The minimum amount required to invest in Nippon India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹100.
- Expense Ratio and Fund Size
- The direct plan of Nippon India Small Cap Fund charges an expense ratio of 0.51% a year, and the fund's size is ₹82,580 Cr.
ITI Small Cap Fund
- Fund Performance
- The ITI Small Cap Fund has given 23.70% annualised returns in the past three years and 18.38% in the last five years. In the past year it has returned 22.17%.
- Minimum Investment Amount
- The minimum amount required to invest in ITI Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹500.
- Expense Ratio and Fund Size
- The direct plan of ITI Small Cap Fund charges an expense ratio of 0.45% a year, and the fund's size is ₹3,603 Cr.
Axis Small Cap Fund
- Fund Performance
- The Axis Small Cap Fund has given 15.14% annualised returns in the past three years and 15.78% in the last five years. In the past year it has returned 10.97%.
- Minimum Investment Amount
- The minimum amount required to invest in Axis Small Cap Fund via lump sum is ₹100 and via SIP is ₹100.
- Expense Ratio and Fund Size
- The direct plan of Axis Small Cap Fund charges an expense ratio of 0.55% a year, and the fund's size is ₹31,448 Cr.
Bank Of India Small Cap Fund
- Fund Performance
- The Bank Of India Small Cap Fund has given 21.78% annualised returns in the past three years and 20.17% in the last five years. In the past year it has returned 30.87%.
- Minimum Investment Amount
- The minimum amount required to invest in Bank Of India Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
- Expense Ratio and Fund Size
- The direct plan of Bank Of India Small Cap Fund charges an expense ratio of 0.41% a year, and the fund's size is ₹3,307 Cr.
LIC MF Small Cap Fund
- Fund Performance
- The LIC MF Small Cap Fund has given 18.12% annualised returns in the past three years and 17.54% in the last five years. In the past year it has returned 17.92%.
- Minimum Investment Amount
- The minimum amount required to invest in LIC MF Small Cap Fund via lump sum is ₹5,000 and via SIP is ₹200.
- Expense Ratio and Fund Size
- The direct plan of LIC MF Small Cap Fund charges an expense ratio of 0.80% a year, and the fund's size is ₹832 Cr.
Invesco India Smallcap Fund
- Fund Performance
- The Invesco India Smallcap Fund has given 21.95% annualised returns in the past three years and 19.45% in the last five years. In the past year it has returned 15.89%.
- Minimum Investment Amount
- The minimum amount required to invest in Invesco India Smallcap Fund via lump sum is ₹100 and via SIP is ₹100.
- Expense Ratio and Fund Size
- The direct plan of Invesco India Smallcap Fund charges an expense ratio of 0.40% a year, and the fund's size is ₹15,744 Cr.
Union Small Cap Fund
- Fund Performance
- The Union Small Cap Fund has given 17.03% annualised returns in the past three years and 17.12% in the last five years. In the past year it has returned 23.85%.
- Minimum Investment Amount
- The minimum amount required to invest in Union Small Cap Fund via lump sum is ₹1,000 and via SIP is ₹500.
- Expense Ratio and Fund Size
- The direct plan of Union Small Cap Fund charges an expense ratio of 0.77% a year, and the fund's size is ₹2,667 Cr.
Bandhan Small Cap Fund
- Fund Performance
- The Bandhan Small Cap Fund has given 23.65% annualised returns in the past three years and 19.52% in the last five years. In the past year it has returned 12.63%.
- Minimum Investment Amount
- The minimum amount required to invest in Bandhan Small Cap Fund via lump sum is ₹1,000 and via SIP is ₹100.
- Expense Ratio and Fund Size
- The direct plan of Bandhan Small Cap Fund charges an expense ratio of 0.35% a year, and the fund's size is ₹34,176 Cr.
How do small cap funds work?
A mutual fund pools money from many investors and a fund manager invests it. In a small cap fund, the manager buys shares of small companies, so the fund's value follows how those shares perform.
You buy units of the fund at its net asset value (NAV), the price of one unit, which is worked out at the end of each trading day. When the shares in the portfolio rise, the NAV rises, and when they fall, the NAV falls.
Returns come from growth in the share prices of the companies the fund holds, and sometimes from dividends they pay. Because small companies are small, their share prices usually move more than those of larger companies, in both directions.
Every fund has an expense ratio, a yearly fee charged as a percentage of its assets. A direct plan has a lower expense ratio than the regular plan of the same fund, because it does not pay a distributor. Many funds also charge an exit load if you sell within a set period, often a year, so check the scheme document before you invest.
Who should invest in small cap funds?
Whether a small cap fund fits you depends on how its benefits and its risks sit with your goals, your time horizon and your comfort with large falls.
Benefits of small cap funds
- Exposure to small companies that are still early in their growth, which can offer higher long-term returns than larger companies, though not in every period.
- A way to own many small companies without having to pick them yourself.
- Diversification across many companies and sectors.
- A professional fund manager picks and monitors the stocks, and you can start with a small amount through a SIP or a lumpsum.
Risks of small cap funds
- High volatility. Falls can be steep and can take many years to recover from.
- Less liquidity. Shares of small companies can be hard to buy or sell in large quantity without moving the price, especially in a stressed market.
- Less established businesses, whose earnings can be less steady.
- Returns are not guaranteed, and a fund that did well in the past may not do so again.
In short, small cap funds offer higher growth potential in return for sharper falls and a longer wait for recovery. That trade-off is why they suit some investors and not others, and why many keep them as one part of a wider portfolio.
Who small cap funds may suit
- Investors with a long time horizon. Small cap funds are generally considered for goals seven years or more away, because the time gives the fund a chance to recover from falls.
- Investors who can handle large swings in value without selling in a fall, and so can stay invested long enough to benefit from the growth.
- Investors who already hold large cap or diversified funds and want some extra growth potential.
Who should be careful
- Investors who need the money within a few years, because a fall close to the time they need it may not have time to recover.
- Investors who would be uncomfortable seeing their investment fall by a large amount.
- First-time investors with no other holdings. A broader fund may be a gentler start.
Taxation on small cap funds
A small cap fund is an equity-oriented fund, because it keeps at least 65% of its assets in listed Indian shares. Your gains are taxed as capital gains, depending on how long you hold the units.
- Short-term capital gains (STCG): if you sell within 12 months, the gain is taxed at 20%.
- Long-term capital gains (LTCG): if you sell after more than 12 months, gains up to ₹1.25 lakh in a financial year are tax-free. Gains above that are taxed at 12.5%.
The ₹1.25 lakh limit applies to all your equity fund and share sales in the year together, not to each fund. Each SIP instalment has its own purchase date, so when you sell, the older instalments are treated as sold first.
Tax rules can change, so check the current rules or ask a tax adviser before you sell.
Frequently asked questions
Are small cap funds a good investment?
Small cap funds can suit investors who have a long horizon and can accept large swings in value. They carry more risk than large cap and mid cap funds, so whether they are right for you depends on your goals, how long you can stay invested and how you would react to a fall.
What are small cap companies?
SEBI defines small cap companies as those ranked 251st and below in India by full market capitalisation. AMFI publishes the list of companies in each category from time to time, so the companies in the category can change.
Are small cap funds risky?
Yes. Small cap funds are more volatile than large cap and mid cap funds. They can fall sharply in a downturn and may take a long time to recover, and shares of small companies can be hard to sell in a stressed market.
How long should I stay invested in a small cap fund?
Small cap funds are generally considered for a horizon of seven years or more. A longer period gives the fund more time to recover from falls.
Is a SIP or a lumpsum better for small cap funds?
A SIP spreads your purchases across many months, so you do not put everything in at one price. This can smooth out the effect of a volatile market. A lumpsum invests everything at once. Neither is always better, and the returns calculator above lets you compare how each would have turned out for a fund in the past.
How do small cap funds differ from large cap and mid cap funds?
Large cap funds invest in the biggest 100 companies and are usually less volatile. Mid cap funds invest in companies ranked 101st to 250th. Small cap funds invest in companies ranked 251st and below, and are usually the most volatile of the three.
How are small cap funds taxed?
They are taxed as equity funds: 20% on gains from units sold within 12 months, and 12.5% on gains above ₹1.25 lakh in a financial year from units sold after 12 months.
Which is the best small cap fund?
There is no single best fund for everyone. The list above shows 10 small cap funds in no particular order. To see their ranks, open the Blacklitt app.
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The funds on this page are shown for information and education, with figures as of 30 September 2026. Past performance does not indicate future returns. This is not personalised investment advice or a recommendation to buy or sell any fund, so check that a fund suits your own goals, time horizon and risk appetite, or speak to an adviser, before you invest.
Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
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