10 fast-growing small caps mutual funds bought in Jun-Aug

Summary: Over the last 25 years, small caps have mostly outpaced both mid and large caps. In this story, we detail this outperformance, show a framework to pick them the right way and list 10 small caps whose fast growth and sound quality are catching institutional attention. If the stock market were a family, large caps would be the wise old grandparents—steady, dependable and unlikely to surprise you. Mid caps would be the middle-aged uncles and aunts—experienced but still energetic enough to grow. And then small caps: the teenagers of the market. Ambitious, unpredictable and sometimes even a little reckless. These are the companies that can light up your portfolio like fireworks but also blow up in your face if you’re not careful. Yet here’s the surprising part: for all their mood swings, small caps have been the kings of returns in Indian markets. Ignore them and you might be ignoring tomorrow’s biggest wealth creators. How small caps outperform larger peers Small caps have more room to grow than other peers and the potential to turn into mid caps and even large caps. When they do, they create substantial wealth. Here’s how we tested this: We picked companies that either stayed in their market category or moved up a division (small to mid, small to large, mid to large) over the last 25 years. In every five-year period over this time, small caps gave an annual median return of 21.6 per cent. Compare that with 19.5 per cent for mid caps and just 13.5 per cent for large caps. That’s not just winning, it’s lapping the field. Additionally, in every five-year period, small caps beat mid caps about 52 per cent of the time and large caps a whopping 72 per cent of the time. In effect, the teenagers outperformed the adults more often than not. The fast, the steady and the slow Small caps prove to be the sprinters of the market, mid caps jog close behind, while large caps walk steadily. Category Median 5Y return (%pa) Small caps 21.6 Mid caps 19.5 Large caps 13.5 Data based on annualised five-year rolling returns from FY00 to FY25 The flip side Every superhero has a weakness. And small caps have a big one: they also stumble badly when things go wrong. Look at these patches of pain: From 2015 to 2020, small caps delivered negative annual returns of 1.3 per cent. Yep, five years of running on a treadmill and going nowhere. By comparison, mid caps gave a decent 6.4 per cent and large caps a flat 1 per cent. From 2007 to 2012, annualised returns shrank to 8.5 per cent. Mid caps, on the other hand, returned 15.5 per cent and large caps 13.4 per cent. From 2008 to 2013, they fell further, to just 3.6 per cent. (Mid caps- 13.2 per cent, Large caps- 6.7 per cent) In essence, small caps also wobble more than mid and large caps. We covered this in our earlier story w

This article was originally published on September 23, 2025.