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Summary: A decade ago, a modest Rs 10,000 monthly SIP was easy to overlook. Today, in the hands of the right small-cap funds, that same disciplined habit has grown into impressive wealth. We look at the five funds that made this possible.
Small-cap funds are equity mutual funds that invest predominantly in shares of small companies. As per SEBI's mandate, these firms are ranked 251st and beyond by market capitalisation, and a small-cap fund must park at least 65 per cent of its corpus in such companies. Given that these businesses are smaller and less established, they tend to be more volatile than their large- and mid-cap counterparts, but also carry the potential for sharper long-term growth.
That potential has shown up in the numbers. The small-cap category has delivered impressively over longer time horizons. In fact, over a 10-year period, the category gave an average return of 17 per cent, becoming the best-performing equity fund category. And had you started a Rs 10,000 monthly SIP in any top-performing small-cap fund 10 years back, your money would have grown to over Rs 35 lakh today.
Here, we look at five such small-cap funds.
#5 DSP Small Cap Fund
- Value of a Rs 10,000 monthly SIP over 10 years: Rs 35.5 lakh
- 10-year SIP returns: 20.5 per cent
- Expense ratio: 0.66 per cent
- Assets under management (AUM): Rs 20,221 crore
Top 5 stock holdings
| Company name | % of net assets |
|---|---|
| Lumax Auto | 4.16 |
| Kirloskar Oil | 3.83 |
| Thangamayil Jew | 3.72 |
| Sansera Eng | 2.95 |
| Shriram Pistons | 2.37 |
#4 Union Small Cap Fund
- Value of a Rs 10,000 monthly SIP over 10 years: Rs 36.7 lakh
- 10-year SIP returns: 21.1 per cent
- Expense ratio: 0.79 per cent
- Assets under management (AUM): Rs 2,402 crore
Top 5 stock holdings
| Company name | % of net assets |
|---|---|
| Gabriel India | 3.73 |
| Karur Vysya Bank | 3.67 |
| Navin Fluorine | 3.55 |
| Kirloskar Oil | 3.1 |
| SJS Enterprises | 3.08 |
#3 Axis Small Cap Fund
- Value of a Rs 10,000 monthly SIP over 10 years: Rs 36.7 lakh
- 10-year SIP returns: 21.1 per cent
- Expense ratio: 0.55 per cent
- Assets under management (AUM): Rs 30,089 crore
Top 5 stock holdings
| Company name | % of net assets |
|---|---|
| Krishna Institute | 2.71 |
| Torrent Pharma | 2.59 |
| CCL Products | 2.58 |
| City Union Bank | 1.8 |
| Sai Life Sciences | 1.65 |
#2 Nippon India Small Cap Fund
- Value of a Rs 10,000 monthly SIP over 10 years: Rs 39.9 lakh
- 10-year SIP returns: 22.7 per cent
- Expense ratio: 0.52 per cent
- Assets under management (AUM): Rs 78,957 crore
Top 5 stock holdings
| Company name | % of net assets |
|---|---|
| HDFC Bank | 1.89 |
| Bharat Heavy Electricals | 1.78 |
| Apar Industries | 1.53 |
| TD Power Systems | 1.38 |
| Karur Vysya Bank | 1.38 |
#1 Quant Small Cap Fund
- Value of a Rs 10,000 monthly SIP over 10 years: Rs 46.8 lakh
- 10-year SIP returns: 25.6 per cent
- Expense ratio: 0.63 per cent
- Assets under manage
- ment (AUM): Rs 34,069 crore
Top 5 stock holdings
| Company name | % of net assets |
|---|---|
| HFCL | 5.44 |
| Adani Enterprises | 4.72 |
| RBL Bank | 4.65 |
| Adani Power | 3.72 |
| Aegis Logistics | 3.39 |
The 5 small-cap stars
Had you started a Rs 10,000 monthly SIP in these funds, your money would have grown to over Rs 35 lakh today
| Fund name | 10-year SIP returns (%) | Value Research Rating |
|---|---|---|
| Quant Small Cap | 25.6 | ★★★ |
| Nippon India Small Cap | 22.7 | ★★★★ |
| Axis Small Cap | 21.1 | ★★★ |
| Union Small Cap | 21.1 | ★★★★ |
| DSP Small Cap | 20.5 | ★★★ |
| Returns are for direct plans as of August 18, 2026 | ||
Should you invest in any of these funds?
Small-cap funds are ideal for investors with a long-term horizon (at least 7-10 years) and the stomach for volatility that comes with it. They are not suited to those who might need their money at short notice, or to investors who tend to panic at every market swing. The same drawdowns that can look alarming over a year or two are often just noise over a decade, but only if you're able to stay invested through them.
That said, if you want to know which small-cap funds, or fund category more broadly, suit your goals and risk appetite, consider subscribing to Value Research Fund Advisor. You'll get expert-backed advice and recommendations on where to invest.
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