Small-cap mutual funds consist of stocks of small-cap companies with a market capitalisation of less than ₹5000 crores. While these stocks offer high returns, they are risky, too. If you are seeking high-growth opportunities by investing in small-cap stocks, here is the list of top funds for 2025.
Top Small-Cap Stocks in 2025
| S.NO | Small-Cap Stocks | Category | 3-Year Return | Fund Size (Cr) |
| 1. | Bandhan Small-Cap Fund | Equity | 33.76% | ₹10,244 |
| 2. | ITI Small-Cap Fund | Equity | 11.36% | ₹2293 |
| 3. | Invesco India Small-Cap Fund Direct-Growth | Equity | 29.34% | ₹6199 |
| 4. | Quant Small-Cap Fund | Equity | 28.29% | ₹26,221 |
| 5. | Nippon Small-Cap Fund | Equity | 27.83% | ₹58,029 |
| 6. | Axis Small-Cap Fund | Equity | 22.87% | ₹23,317 |
| 7. | Sundaram Small-Cap Fund Direct-Growth | Equity | 24.60% | ₹3058 |
| 8. | Canara Rebeco Small-Cap Fund | Equity | 19.69% | ₹11,475 |
| 9. | HSBC Small-Cap Fund Direct- Growth | Equity | 25.10% | ₹14,737 |
| 10. | Franklin India Smaller Companies Fund Direct-Growth | Equity | 28.24% | ₹12,530 |
| 11. | HDFC Small_Cap Fund | Equity | 26.92% | ₹30,880 |
| 12. | Kotak Small-Cap Fund | Equity | 19.9% | ₹15,867 |
| 13. | TATA Small-Cap Stocks | Equity | 21.97% | ₹9,418 |
| 14. | UTI Small-Cap Fund | Equity | 20.57% | ₹4,238 |
| 15. | Bank of India Small-Cap Fund | Equity | 22.78% | ₹1,639 |
The Working and Advantages of Small-Cap Mutual Funds
Small-cap stocks are mutual funds of companies that are ranked under 250 on the BSE and NSE. As per SEBI, small-cap mutual funds are those that have at least 65% of their investments in small-cap equity.
It is crucial to note that though small-cap mutual funds are on the lower side of the ranking, they carry the potential to give you high returns, as their potential for growth is tremendous.
Advantages:
- Small-cap stocks have all the chances of turning into large-cap stocks over some time. Thus, when you invest in a small-cap mutual fund early, there is a high chance of potential upside in your investments.
- In most cases, small-cap mutual funds outperform large-cap stocks and deliver higher returns to investors.
- Since the growth potential of small-cap stocks is higher, it can help you beat inflation. Thus, you can have a high purchasing power at your disposal in the long run.
- Investing in small-cap funds also enables you to diversify your portfolio and reduce the dependency on large-cap funds.
- Small-cap stocks are more volatile than the mid and large-cap funds. Thus, their prices fluctuate drastically as a result of socioeconomic events.
- Small-cap fund companies provide a competitive advantage over other stable funds that consist of debt and index funds.
Summary
If you are looking to invest in small-cap stocks for long-term financial growth, the Bandhan Small-Cap Fund, Franklin India Smaller Companies Fund Direct Growth, HDFC Small-Cap Fund, etc., are some of the top-performing ones in 2025. With their 3-year returns ranging from 10-30%, you can expect high wealth creation from these mutual funds.
However, when investing in small-cap stocks, it is essential to know their tax implications, the benefits and their suitability. If you’re someone with a high-risk appetite and looking to grow financially in the long term, then this investment option is for you.
Disclaimer: The information provided in this article is for general informational purposes only. It does not constitute financial, investment, or trading advice. We strongly recommend that individuals conduct their own research and seek advice from qualified professionals before making any investment decisions.
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