Unveiling The Top Small Cap Mutual Funds With Outstanding 5-Year Performance

In the dynamic realm of mutual funds investment, small-cap funds have emerged as the epitome of growth potential. Designed to invest in companies with relatively smaller market capitalizations, these funds have garnered significant attention from astute investors seeking high returns. 

Amidst the plethora of choices available in the market, identifying the top performers can be a daunting task. However, fear not, as we unveil the small-cap mutual funds that have exhibited exceptional 5-year performances.

In this article, we dive deep into the world of mutual funds investment, exploring the captivating potential of small-cap funds and shedding light on the ones that have proven their mettle over time. So, join us as we unravel the secrets behind these outstanding performers and discover the opportunities they hold for long-term wealth creation.

Understanding Small Cap Mutual Funds

Small-cap mutual funds are a type of mutual fund investment focusing on companies with a smaller market capitalization. They come with their own set of challenges and benefits. 

Potential Risks and Rewards: Small-cap companies offer significant growth potential. However, they can also be more vulnerable to market volatility. Hence, while the prospect of high returns is enticing, the risks associated are equally high.

Role in a Diversified Portfolio: These funds serve as a means to diversify your investment portfolio. Their performance is often uncorrelated with large-cap stocks, thus providing the much-needed balance in your portfolio.

Why 5-Year Performance Matters

Analyzing a mutual fund’s performance over five years is a meaningful approach to assessing its reliability and consistency. 

  • Significance of a 5-year Time Frame: A 5-year time frame is long enough to evaluate the mutual fund’s performance across different market cycles, including bullish and bearish phases. It provides insights into how the fund has managed both positive and adverse market conditions.
  • Influence of Market Cycles and Economy: It helps investors assess the fund’s resilience during economic downturns and its ability to capitalize on bullish markets. It indicates the fund’s versatility to adapt to market conditions.
  • Assessing Fund Manager’s Strategy and Consistency: It sheds light on the fund manager’s investment strategy and how consistently it has been executed. If a mutual fund has consistently performed well over the past five years, it indicates that the fund manager’s strategies are effective.

Key Metrics to Evaluate Small Cap Mutual Funds

Just as every mutual funds investment requires careful scrutiny, small-cap mutual funds demand an even more detailed analysis.

  • Explanation of Key Performance Indicators (KPIs): There are several indicators like Net Asset Value (NAV), Assets Under Management (AUM), Expense Ratio, etc. NAV gives you the per unit cost of the mutual fund, AUM indicates the fund size, and the Expense Ratio informs you about the annual charges taken by the fund house to manage your investments.
  • How to Evaluate Fund Performance Using these Metrics: A higher NAV doesn’t always mean a better fund, nor does a larger AUM guarantee better returns. It’s about the fund’s growth and how efficiently it’s managed. An efficient fund house will maintain lower expense ratios while delivering high returns.
  • Importance of Looking Beyond Returns: It’s crucial to look at risk-adjusted returns. The Sharpe Ratio, for instance, tells you how much return the fund has delivered vis-à-vis the risk taken. A higher Sharpe Ratio indicates better performance at the same risk level.

Top Small Cap Mutual Funds with Outstanding 5-Year Performance

Having understood the critical aspects of small-cap mutual funds, let’s delve into some funds that have shown remarkable performance in the last five years.

Axis Small Cap Fund

In the past five years, the direct scheme of the Axis Small Cap Fund has yielded a return of 20.22%, while its regular scheme has offered a return of 18.52%. This fund mirrors the NIFTY Smallcap 250 Total Return Index, which generated a return of 9.25% in the same time frame.

Nippon India Small Cap Fund

The direct strategy of the Nippon India Small Cap Fund registered a return of 17.80% over the last five years, compared to its regular strategy, which recorded a return of 16.71%. This fund is designed to follow the NIFTY Smallcap 250 Total Return Index, which has produced a return of 9.25% in the same duration. 

Kotak Small Cap Fund

Over the past five years, the Kotak Small Cap Fund’s direct strategy has achieved a return of 17.13%, while its regular strategy has witnessed a return of 15.54%. This scheme follows the path of the NIFTY Smallcap 250 Total Return Index, which returned 9.25% in the same period.

SBI Small Cap Fund

In a five-year term, the SBI Small Cap Fund’s direct scheme has reported a return of 15.96%, while its regular scheme recorded a return of 14.65%. The fund aligns with the NIFTY Smallcap 250 Total Return Index, which has posted a five-year return of 9.25%.

ICICI Prudential Smallcap Fund

Over the last five years, the direct scheme of the ICICI Prudential Smallcap Fund has registered a return of 15.82%, while its regular scheme has produced a return of 14.36%. This scheme tracks the NIFTY Smallcap 250 Total Return Index, which has returned 9.25% over the same period.


Embarking on your mutual fund investment journey can be intimidating, given the abundance of options. With their high return potential, small-cap mutual funds can seem attractive, but it’s crucial to evaluate them on parameters beyond just returns. 

A 5-year performance track record can illuminate the fund’s consistency and resilience against market volatility. Consider leveraging new-age solutions like AI-driven tools and robo-advisors in your quest for wealth creation.

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