Small Cap Funds

Small-cap funds dominate the top-performing active diversified equity mutual fund list in 2026 so far, while mid-cap schemes also feature over longer periods. A comparison of YTD, three-year and five-year returns shows how rankings change across different investment horizons.

Active and passive small-cap funds follow different investment approaches, even when they are linked to the same benchmark. Their 1-year returns show a notable divergence, while differences in portfolio construction offer clues to what may be driving the gap.

Bandhan Small Cap Fund made significant portfolio changes in July, adding 15 new stocks and exiting nine. HDFC Bank, AWL Agri Business and Sterlite Technologies were among the key stocks where the fund raised its holdings.

Small-cap mutual funds attracted a record ₹7,768 crore in July, while large-cap funds saw their first outflow in 30 months. The sharp shift in equity fund flows raises questions about small-cap exposure, portfolio diversification and the right level of equity risk for investors.

AMFI July 2026 data shows a sharp shift in investor inflows. Small-cap funds surged 39%, debt staged a recovery from outflows to inflows, while SIPs stayed above ₹31,000 crore. But rising mid-cap and small-cap valuations raise a fresh concern.

Small-cap and mid-cap funds dominated the SIP return charts over three, five and 10 years. The rankings also reveal a handful of AMCs that consistently produced some of the best-performing equity mutual funds.

Small caps have indeed outperformed over the long term, but the magnitude of this outperformance seems too small to justify the additional risk.

June marked a significant resurgence for India's mutual funds with inflows of ₹49,095 crore, a 69% increase from May. Strong demand for equity, particularly in mid and small-cap funds, signals renewed investor confidence despite global uncertainties.

Indian retail investors are shifting away from mid- and small-cap stocks due to increased market volatility and weak earnings. This shift is reflected in drop in mutual fund inflows, with large-cap stocks becoming more attractive for their stability during uncertain market conditions.

Despite a downturn in Indian markets, retail investors remain committed to long-term investments, with equity mutual fund AUM reaching ₹30.57 lakh crore, a 40.3% increase YoY. December recorded consistent inflows into equity funds for the 46th month, driven by thematic funds and sectoral schemes.