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Top 10 Small-Cap Mutual Funds 2021-22
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Top 10 Small-Cap Mutual Funds 2021-22


Ronit and Jatin were business partners. They used to make all business decisions together. One day Ronit told Jatin that he was looking for some mutual funds to invest in the remaining of his savings so that the interest on mutual funds would help him increase his savings by the interest received but was not sure where to invest in. Jatin told him that he could consult a financial guide to guide him towards the best small-cap mutual funds. After hearing from him, Ronit invested in small cap mutual funds. He is now satisfied with his investment which will, in return, give him additional benefits for the investment he is making today.

Top 10 Small-Cap Mutual Funds 2021-22

What is Small-Cap Mutual Funds

Do small-Cap Funds invest a large percentage of their investable capital in small-cap company stock or equity-related products? According to the Securities and Exchange Board of India (SEBI), small-cap plans must invest at least 80% of their total assets in small-cap firms, according to the Securities and Exchange Board of India (SEBI). 

In addition, SEBI classifies small-cap firms as those with a market valuation of less than $250 million. This category includes companies having a market value of less than Rs. 500 crores.

It’s crucial to remember that small-cap funds are high-risk investments. 

Even the tiniest amount of market volatility may significantly influence the share prices of small-cap firms. On the other hand, these stocks have a significant potential to provide enormous profits. Consider this: a minor business has a lot of room for expansion, and even when it does, its stock price will skyrocket. For short-term investing requirements, however, many investors prefer small-cap programs. 

This might be detrimental because small businesses require time to develop. As a result, small-cap funds are typically advised if you have a high-risk tolerance and a lengthy investing horizon.

Best Small Cap Funds for 2021-22

Some of the best small cap mutual funds are:

Fund Name 1 Year 3 Years 5 Years 7 Years 10 Years
Axis Small Cap Fund 68.55% 25.16%


19.89% 19.24%
SBI Small Cap Fund 60.91% 18.51% 21.06% 23.25% 24.50%
Nippon india small cap fund 84.91% 19.46% 21.17% 20.57% 23.89%
Kotak Small Cap Fund 94.72% 24.99% 18.81% 19.88% 20.18%
HDFC Small Cap Fund 80.01% 14.54% 17.63% 17.48% 18.00%
ICICI Prudential Small Cap Fund 82.23% 20.73% 15.72% 14.31% 16.96%
dsp midcap fund 69.88% 18.31% 14.37% 18.77% 21.12%
L&T Emerging Business Fund 83.10% 13.07% 17.35% 18.08%
Franklin Smaller Companies Fund 76.25% 11.67% 11.59% 14.80% 20.07%
Aditya Birla Sun Life Small Cap Fund 74.00%


9.41% 10.86% 14.81% 16.15%

Why invest in Small Cap Funds?

Investing in Small Cap Funds have several advantages, below we listed few pros of investment in Small Cap Mutual Funds –

  • Small-cap stocks tend to expand quicker than large-cap and mid-cap companies following economic recoveries.
  • Company-specific characteristics influence s
  • mall-cap stocks’ performance more than macroeconomic forces.
  • Due to a lack of knowledge and price discovery among market players, small-cap firms have higher development potential.
  • Due to new/emerging areas developing at a quicker rate, small-cap firms provide more strong growth possibilities.
  • Due to innovative technology or products/services, small-cap firms have a more significant chance of gaining market share.
  • Small-cap funds, instead of considerable size, midcap, or sector/thematic funds, have a larger investing universe.
  • The small-cap market is inefficient, with firms that are under-owned and under-researched.


Aspects before investing in Small-Cap Funds

Before investing in small cap mutual funds, you should examine the following factors as an investor:

# Small-Cap Funds’ Risk and Returns: A Small Cap Fund’s Net Asset Value (NAV) is highly susceptible to the performance of its underlying benchmark. As a result, many small-cap funds lose money when dire market circumstances. However, it is a fantastic opportunity for investors ready to take a chance and want fast development.

# Choose a plan with a reduced-Expense Ratio: If you’re new to investing, you should familiarise yourself with the notion of Expense Ratio. To administer your funds, every fund house charges a fee. It recoups these costs by imposing an Expense Ratio charge. This represents a proportion of the scheme’s asset value. Furthermore, SEBI has set a 2.50 per cent maximum limit on the expenditure ratio.

# Small-cap funds outperform large-cap funds in the long run: Small-cap equities are highly vulnerable to market fluctuations. As a result, when the market falls, these stocks are likely to be the worst hit. As a result, whenever investing in Small-Cap Funds, it is critical to also have a long-term investment period to ensure that one’s investment has enough time to earn profits.

# For the risk-averse investor, this is not the place to be: Small-Cap Funds provide a tremendous opportunity to produce benchmark-beating returns, but it’s not for the risk-averse investor. These are, however, hazardous investments that should only be undertaken if you can tolerate price volatility. You can also devote a modest amount of your portfolio to small-cap stocks and keep investing for a long time to increase your wealth-building efforts.


Is it true that small-cap funds outperform large-cap funds in the long run?

Small-cap equities are incredibly vulnerable to market fluctuations. As a result, when the market falls, these stocks are likely to be the worst hit. As a result, while investing in Small-Cap Funds, it is critical to have a long-term investment window to ensure that your investment has enough time to earn profits. Eight to 10 years is the ideal period.

What are some of the benefits of small-cap mutual funds?

Small-cap funds like sbi small cap fund direct growth or axis small cap fund direct growth have several benefits, including the potential for exponential growth and the possibility to invest at a reduced cost. Best small cap mutual funds in firms that have the potential to expand and then become multi-baggers with time, according to industry experts.

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