Top 5 Small Cap Mutual Funds for High Returns in 2026
By Kaushik Brahmakshatriya
Published on 03 September 2026.
Small cap mutual funds
If you’re looking to build wealth over the long term and are comfortable with some ups and downs along the way, small cap mutual funds can be worth considering. These funds primarily invest in companies ranked 251st and beyond by full market capitalization, giving investors an opportunity to participate in the growth of relatively smaller businesses.
However, higher growth potential also comes with higher risk. Small cap funds can experience sharp price movements, especially during market corrections, so they are generally better suited to investors who can stay invested for the long haul. In this article, we’ll look at five small cap mutual funds that stand out in 2026, comparing factors such as returns, expense ratios, and assets under management (AUM) to help you evaluate them more confidently before investing.
1. Nippon India Small Cap Fund:
Nippon India Small Cap Fund is one of the largest and most diversified small cap schemes in India, with an AUM of over ₹74,000 crores. It has delivered a 1-year return of around 9.6%, a 3-year return of nearly 19.7%, and a 5-year return of about 21.9%. Its broad portfolio spread across 150+ stocks helps reduce concentration risk, making it a solid pick for investors seeking steady long-term growth within the small cap mutual funds category.
2. HDFC Small Cap Fund
HDFC Small Cap Fund is backed by one of India’s most trusted fund houses. It has posted a 3-year return of roughly 15.1% and a 5-year return of about 17.8%, with an AUM crossing ₹38,000 crores. The fund follows a quality-focused approach, favoring businesses with durable competitive advantages, which tends to lower drawdowns during market corrections compared to some aggressive peers.
3. DSP Small Cap Fund
DSP Small Cap Fund has shown consistent performance with a 1-year return near 11.4%, a 3-year return of about 19.5%, and a 5-year return close to 19.4%. With an AUM of around ₹18,000 crores and a reasonable expense ratio of 0.8%, it remains a favorite among SIP investors who want balanced exposure to high-growth small cap stocks.
4. Quant Small Cap Fund
Quant Small Cap Fund uses a distinctive VLRT (Valuation, Liquidity, Risk, Timing) framework to pick stocks, and it has historically delivered some of the highest 5-year CAGR figures in the entire small cap category. This aggressive, data-driven strategy suits experienced investors who are comfortable with higher short-term volatility in exchange for potentially superior long-term alpha.
5. Canara Robeco Small Cap Fund
Canara Robeco Small Cap Fund has delivered annualized returns of around 13.6% over three years and 16.3% over five years. Backed by a government-supported AMC, it follows a quality-first, lower-drawdown approach, making it a comparatively conservative choice for investors who still want meaningful exposure to small cap mutual funds.
| Fund Name | 3-Year Return | 5-Year Return | Expense Ratio |
| Nippon India Small Cap Fund | ~19.7% | ~21.9% | 0.70% |
| HDFC Small Cap Fund | ~15.1% | ~17.8% | 0.80% |
| DSP Small Cap Fund | ~19.5% | ~19.4% | 0.80% |
| Quant Small Cap Fund | High (variable) | 23%+ (historical) | Varies |
| Canara Robeco Small Cap Fund | ~13.6% | ~16.3% | Varies |
Note :Returns are approximate, based on direct growth plans, and subject to change with market conditions. Always check the latest NAV and factsheet before investing.
FAQ (Frequently Asked Questions)
Q Are small cap mutual funds safe?
No investment is completely safe; small cap funds are higher risk than large or mid cap funds and can fall sharply during market downturns.
Q What is the ideal investment horizon?
Most experts recommend a 7-10 year horizon to ride out volatility. Can I start with a small amount? Yes, most funds allow SIPs starting from ₹500-₹1,000 per month.
Conclusion
Small cap mutual funds can be powerful long-term wealth creators, but they demand patience and a genuine risk appetite. Funds like Nippon India, HDFC, DSP, Quant, and Canara Robeco each bring a different strategy to the table, from diversified stability to aggressive alpha-seeking. Before investing, compare each fund’s recent portfolio, expense ratio, and fund manager track record, and consider consulting a financial advisor to align your choice with your personal goals and risk tolerance.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Mutual fund investments are subject to market risks; please read all scheme-related documents carefully before investing.
