Smallcap mutual funds are designed for investors looking for high-growth opportunities by investing in companies with smaller market capitalization. While these funds can be more volatile than largecap or midcap funds, they also offer the potential for superior long-term returns. To create this article (inspired by your earlier hit post), we’ve shortlisted 5 Best Smallcap Mutual Funds to invest in 2025 using 3-year and 5-year rolling returns over a 10-year time frame.
Earlier we wrote about Best Midcap Mutual Funds to Invest in 2025 based on Rolling Returns.
What Are Rolling Returns in Mutual Funds?
Rolling returns are calculated over overlapping periods (e.g., every possible 3-year or 5-year window) in the chosen timeframe. They eliminate the bias of a single start/end date and show consistency across market cycles. We focus on median rolling returns as they reflect the typical investor experience better than extremes.
How We Filtered These Funds (Same Approach as Your Hit Article)
- Considered Direct – Growth plans only.
- Used a 10-year history (8-Sep-2015 to 7-Sep-2025).
- Evaluated 3-year and 5-year rolling returns.
- Preferred funds with higher average and median rolling returns.
- Favoured funds with low negative periods and a high share of >20% rolling outcomes.
- Excluded funds with governance concerns or sustained underperformance.
We did similar analysis earlier in Best Flexicap Mutual Funds for 2025 based on rolling returns and Top Balanced Mutual Funds based on rolling returns for 2025.
Top 5 Smallcap Mutual Funds (Period: 8-Sep-2015 to 7-Sep-2025)
We used some of the popular websites like advisorkhoj, moneycontrol and valueresearch for this analysis.
#1 – Quant Small Cap Fund
3Y Avg: 25.88% | 5Y Avg: 29.18%
Highlights:
- Highest 3Y and 5Y averages.
- Over 82% of 5Y rolling periods >20% returns.
- Aggressive strategy with high alpha potential.
Who Can Invest:
- Aggressive investors looking for superior alpha.
- SIP investors with a 7–10 year horizon.
Risk Factors:
- High volatility; sharper drawdowns possible.
- Concentrated bets.
This fund was part of our earlier article on 7 Mutual Funds That Turned ₹ 1 Lakh Into ₹ 5 Lakhs in 5 Years.
#2 – Nippon India Small Cap Fund
3Y Avg: 23.70% | 5Y Avg: 25.32%
Highlights:
- Consistent long-term performer.
- Over 68% of 5Y windows >20% returns.
Who Can Invest:
- Growth-oriented investors seeking diversification.
- Suitable for disciplined SIP investors.
Risk Factors:
- Volatile during mid/smallcap corrections.
- Requires patience to ride through cycles.
#3 – SBI Small Cap Fund
3Y Avg: 21.05% | 5Y Avg: 22.93%
Highlights:
- Well-diversified portfolio.
- Over 71% of 5Y periods >20% returns.
Who Can Invest:
- Moderate-to-aggressive investors.
- Long-term SIP investors.
Risk Factors:
- May underperform in large-cap-led markets.
We covered the analysis about this fund earlier too at 10 Mutual Funds That Turned ₹ 1 Lakh Into Over ₹ 10 Lakhs in 15 Years.
#4 – Axis Small Cap Fund
3Y Avg: 22.12% | 5Y Avg: 23.99%
Highlights:
- Consistent top-quartile performer.
- Over 75% of 5Y rolling periods >20% returns.
Who Can Invest:
- Investors seeking a blend of consistency and growth.
Risk Factors:
- Valuation risks in momentum-driven phases.
#5 – HDFC Small Cap Fund
3Y Avg: 20.45% | 5Y Avg: 21.27%
Highlights:
- Solid long-term track record.
- Balanced portfolio with a value bias.
Who Can Invest:
- Conservative investors wanting smallcap exposure.
Risk Factors:
- Slower in high-growth phases.
This fund has superior performance which we analysed in 6 Mutual Funds That Turned ₹ 1 Lakh Into Over ₹ 6 Lakhs in 10 Years.
🔍 AMC Governance Note
In 2024, Quant Mutual Fund was investigated by SEBI for afront-running case involving some fund managers. While the AMC has denied wrongdoing and performance remains strong, this highlights governance risk. Investors are advised to monitor AMC-level developments and diversify across fund houses.
Conclusion
These five smallcap mutual funds deliver a powerful mix of high rolling returns, consistency, and diversification benefits. Align your choice with your risk appetite and investment horizon (7+ years). For best results, use SIPs and review portfolios annually.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. This analysis is for informational purposes only and not investment advice.
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