Out of nearly 45 small cap mutual fund schemes available in the market, only these 9 funds managed to generate more than 20% returns in the last one year. A closer look at these funds shows a mix of newer entrants riding a strong momentum phase and a few established names backing up their short-term performance with a longer track record.
Small cap funds have had a sharp run over the past year, with several new-age schemes — many launched only in the last 2-3 years — posting returns well ahead of their category average. At the same time, a handful of older, more established small cap funds have also found a place on this list, showing that consistent stock-picking still holds up even in a crowded small cap space.
In this article, we analyse 9 small cap mutual funds that delivered over 20% returns in the last 1 year, and look at how their 3-year, 5-year, and 10-year numbers stack up — or in some cases, don’t yet exist.
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How We Shortlisted These Funds
To identify these high return small cap mutual funds, we applied the following screening criteria:
- Considered all open-ended small cap mutual fund schemes (Direct Plan, Growth option) as per SEBI’s small cap category classification.
- Included both actively managed small cap funds and passive small cap index funds/ETFs for a complete category view.
- Excluded funds without a minimum 1-year performance track record.
- Shortlisted schemes that generated more than 20% returns in the last 1 year, as of [DATE] data.
- Ranked the shortlisted funds in descending order of 1-year returns.
9 Small Cap Mutual Funds With Over 20% Returns in Last 1 Year
| Rank | Fund Name | 1-Yr Return (%) | 3-Yr Return (%) | 5-Yr Return (%) | 10-Yr Return (%) |
|---|---|---|---|---|---|
| 1 | TRUSTMF Small Cap Fund | 34.94 | — | — | — |
| 2 | Bank of India Small Cap Fund | 29.45 | 24.06 | 21.18 | — |
| 3 | Motilal Oswal Small Cap Fund | 27.24 | — | — | — |
| 4 | Union Small Cap Fund | 26.92 | 19.73 | 18.71 | 17.59 |
| 5 | ITI Small Cap Fund | 22.58 | 26.55 | 19.44 | — |
| 6 | Aditya Birla Sun Life Small Cap Fund | 22.55 | 17.71 | 15.10 | 14.32 |
| 7 | JM Small Cap Fund | 22.41 | — | — | — |
| 8 | LIC MF Small Cap Fund | 21.14 | 20.02 | 19.41 | — |
| 9 | DSP Small Cap Fund | 20.26 | 18.95 | 19.00 | 17.45 |
(All returns are Direct Plan, Growth option, as of 13-Aug-26. Data source: ValueResearch. Past performance does not guarantee future returns.)
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What This Table Actually Tells You
This is the part most readers skip, and it’s the one that matters most before you look any further at this list.
Look closely at the table again. 4 out of these 9 funds — TRUSTMF, Motilal Oswal, JM, and to a lesser extent ITI’s longer history — don’t have a full 3-year or 5-year track record yet. That’s not automatically a red flag. It usually means the fund is relatively new and has only recently built up this kind of performance history. But it does mean there’s no way yet to judge how these specific schemes would have behaved through a complete market cycle, including a sharp correction.
Now compare that to the funds that do have a longer history:
- Bank of India Small Cap Fund — 3-year return of 24.06% and 5-year return of 21.18% are both strong in their own right, and its 1-year number isn’t a one-off spike sitting on top of a weak long-term record.
- ITI Small Cap Fund — this is the one fund on the list where the 3-year return (26.55%) is actually higher than the 1-year return (22.58%). That’s a meaningful signal: the fund has been compounding well for a while now, not just catching a recent rally.
- Union Small Cap Fund and DSP Small Cap Fund are the only two schemes here with a full 10-year track record (17.59% and 17.45% respectively), showing they’ve held up across more than one market cycle, even if their most recent 1-year number is comparatively more modest than the newer funds at the top of the list.
If you’re using this list to shortlist funds for further research, the funds with a 3-year and 5-year history behind them (Bank of India, Union, ITI, Aditya Birla Sun Life, LIC MF, DSP) give you more to evaluate than the four newer entrants, however strong their headline 1-year number looks right now.
Why Small Cap Funds Are Seeing This Kind of Momentum
Small cap stocks tend to be the biggest beneficiaries of broad market rallies and improving risk appetite, since they carry higher earnings growth potential but also higher volatility than large cap or even mid cap peers. A combination of stronger domestic flows into small cap schemes, improving small-cap company earnings, and select sector-specific tailwinds (auto ancillaries, capital goods, and financials among them) has helped this category outperform over the past year.
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Risk Factors to Keep in Mind
- Small cap funds carry significantly higher volatility than large cap or flexi cap funds, and 1-year returns in this category can swing sharply in either direction.
- Newer funds (less than 3 years old) on this list have not yet been tested through a full market downturn — their current numbers reflect a favourable market phase.
- A high 1-year return alone should not be the only factor while evaluating a fund; investors should look at rolling returns, downside capture, and portfolio concentration as well.
- Small cap as a category is best suited for investors with a long investment horizon (7+ years) and a high risk tolerance.
Disclaimer: This article is for educational and informational purposes only and should not be construed as investment advice, recommendation, or solicitation to invest in any mutual fund scheme. Mutual fund investments are subject to market risks. Please consult your financial advisor before making any investment decisions.
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