Hey there! If you’re searching for the top 5 small cap mutual funds, you’re clearly looking to give your investment portfolio a serious growth boost. You might have heard the buzz around small-cap funds and are wondering if they’re the right fit for you. It’s a great question. Let’s have a straightforward chat about it.
In this article, we’re going to cut through the noise and explore the top 5 small cap mutual funds in India for 2025. We’ll look beyond just past returns and understand what makes each of these funds a compelling choice for investors who are ready to embrace a bit of volatility for potentially higher rewards down the line.
Table of Contents
Why Invest in Small Cap Mutual Funds in 2025?
The Indian economy is on a solid growth path, and these small companies are often the ones that benefit the most from domestic expansion, leading to potentially explosive growth for patient investors. But if you have a long-term vision—think seven to ten years—and the stomach to handle market swings, the top 5 small cap mutual funds can be a powerful engine for wealth creation.
Diversification: A small-cap fund is like having a well-balanced team. You’re not relying on one star player. If your tech stocks are having an off day, your healthcare or banking investments can pick up the slack, smoothing out your overall returns.
Long-Term Wealth Creation: Look, small-cap investing is a test of patience, not a quick gamble. The short term can be a rollercoaster—these stocks jump around a lot. But if you can strap in for the long haul, say seven to ten years, that volatility becomes the price you pay for truly powerful growth.
Tax Efficiency:They’re also tax-smart. Hold for over a year, and your profits get the ‘long-term’ tag. This means the first ₹1 lakh of your gains each year is completely tax-free, with anything extra taxed at just 10%. It’s a great deal that lets you keep more of what you earn.
Earlier we wrote about: Parag parikh flexi cap fund
Key Factors to Consider Before Choosing Top 5 Small Cap Mutual Funds
Before we jump into the list, it’s crucial to know what you’re getting into. Its isn’t just about who had the highest returns last year, you also have to consider below things before picking top 5 small cap mutual funds
Fund Manager: In the small-cap space, a manager’s experience in sniffing out great companies before everyone else is pure gold. A consistent strategy over many years is a very good sign.
Fund’s AUM (Assets Under Management): Comsider the fund’s size, known as Assets Under Management (AUM). A very small fund might be risky, while a massive fund might find it hard to be nimble in buying and selling smaller company stocks.
Expense ratio:This is the annual fee you pay. A lower fee means more of your money stays invested and works for you. Always choose the direct plan growth option to save on fees and keep more of your returns working for you.
Risk tolerance: Most importantly, take a hard look at your own risk tolerance. If checking your portfolio daily gives you anxiety, small caps require a mindset shift. The key is to invest through SIPs and forget about them for years.
Top 5 Small Cap Mutual Funds in India 2025
1. Nippon India Small Cap Fund
Why It Stands Out: Nippon India Small Cap Fund has a long track record of strong performance. It invests across diverse sectors, ensuring a balance of growth and risk management.
Performance Highlights:
5-Year CAGR: 33.42%
1-Year Return: -8.02%
AUM: ₹64821 Cr
Expense Ratio: 0.64%
Ideal For: Investors seeking aggressive long-term growth. Minimum SIP: ₹100
2. SBI Small Cap Fund
Why Choose This Fund: SBI Small Cap Fund combines steady growth with slightly conservative stock picking. It has delivered consistent returns while keeping risk under control.
Performance Highlights:
5-Year CAGR: 24.99%%
1-Year Return: -9.24%%
AUM: ₹35,244 Cr
Expense Ratio: 0.76%
Ideal For: Investors looking for stability along with high returns. Minimum SIP: ₹500
3. Kotak Small Cap Fund
Why It’s a Top Pick: Kotak Small Cap Fund is known for its agile portfolio management, adjusting quickly to market trends. It focuses on companies with strong fundamentals and growth potential.
Performance Highlights:
5-Year CAGR: 28.98%%
1-Year Return: -8.74%
AUM: ₹17508 Cr
Expense Ratio: 0.52%
Ideal For: Investors ready for moderate-to-high risk with long-term horizon. Minimum SIP: ₹100
4. Axis Small Cap Fund
Why Invest Here: Axis Small Cap Fund focuses on quality small-cap companies, providing a relatively smoother ride for investors entering the high-risk small cap space.
Performance Highlights:
5-Year CAGR: 27.49%
1-Year Return: -3.67%
AUM: ₹25568 Cr
Expense Ratio: 0.57%
Ideal For: Conservative small cap investors looking for steady growth. Minimum SIP: ₹100
5. HDFC Small Cap Fund
Why Include in the List: HDFC Small Cap Fund blends aggressive small cap picks with some stable mid-cap stocks. It is backed by strong research and a disciplined investment strategy.
Performance Highlights:
5-Year CAGR: 31.02%
1-Year Return: -0.18%
AUM: ₹36,294 Cr
Expense Ratio: 0.68%
Ideal For: Long-term investors seeking a balance between growth and stability. Minimum SIP: ₹100
Comparison Table: Top Small Cap Funds India 2025
| Fund Name | 5-Year CAGR | 1-Year Return | AUM (₹ Cr) | Expense Ratio | Min SIP |
|---|---|---|---|---|---|
| Nippon India Small Cap | 33.42% | -8.02% | 64,821 | 0.64% | ₹100 |
| SBI Small Cap | 24.99% | -9.24% | 35,244 | 0.76% | ₹500 |
| Kotak Small Cap | 28.98% | -8.74% | 17,508 | 0.52% | ₹100 |
| Axis Small Cap | 27.49% | -3.67% | 25,568 | 0.57% | ₹100 |
| HDFC Small Cap | 31.02% | -0.18% | 36,294 | 0.68% | ₹100 |
Note: Top 5 Small Cap Mutual Funds data shown above is based on Direct Plan – Growth option. Returns and AUM are illustrative as of August 2025
Conclusion About Top 5 Small Cap Mutual Funds
So, there’s your clear picture of the top 5 small cap mutual funds. Just remember, the right fund for you is the one that fits your own financial goals and comfort with risk. This isn’t about getting rich overnight—it’s about building wealth steadily over time.
The easiest way to start? With a SIP. It takes the stress out of market ups and downs and builds your investment habitually. Do a little research, consider chatting with an advisor, and get ready to put your money to work. Happy investing.
Disclaimer: Mutual fund investments are subject to market risks. Please do your own research or consult a financial advisor before investing.
FAQs About Top 5 Small Cap Mutual Funds
1.Which mutual fund is best in small cap?
HDFC Small Cap Fund currently leads with the highest 5-year CAGR and minimal 1-year loss among peers. It offers strong long-term growth with relatively better short-term stability.
2.How do I choose a small-cap fund?
Choose a small-cap fund with consistent long-term performance, low expense ratio, and experienced fund management. Ensure it aligns with your risk tolerance and investment horizon.
3.What is a 5 star mutual fund?
A 5-star mutual fund is rated highest by agencies like Morningstar based on past performance, risk-adjusted returns, and consistency. It signals strong historical performance but doesn’t guarantee future results.
4.Which small cap mutual fund is best for long term?
HDFC Small Cap Fund stands out for long-term investment with the highest 5-year CAGR and strong portfolio fundamentals. Its consistent performance makes it a top choice for growth-oriented investors.