The rule behind "best"
"Best" is not one thing, so this post fixes a rule and applies it the same way in every category of this series. Of the 26 small cap funds with a 3-year record, 21 are open to new money, hold at least ₹1,000 crore (average AUM, July–September 2026) and have a 5-year record. They are ranked by 3-year compounded annual return, Direct plan, Growth option, from NAVs to 27 October 2026. On that rule the leader is Bandhan Small Cap Fund at 22.44% a year, against a category median of 13.45%. The same fund tops the list with no filter applied.
A small cap fund holds at least 65% in companies ranked 251st and below by market value. These are the most volatile mainstream equity funds, and the ones where size starts to matter: a fund with tens of thousands of crores has far fewer stocks it can buy in meaningful quantity.
The top five
| Fund | 1 year | 3 years | 5 years | 10 years | Expense ratio | AUM (₹ crore) |
|---|---|---|---|---|---|---|
| Bandhan Small Cap Fund | 2.79% | 22.44% | 18.12% | – | 0.65% | 32,794 |
| ITI Small Cap Fund | 11.49% | 22.05% | 16.91% | – | 0.84% | 3,533 |
| Invesco India Small Cap Fund | 5.50% | 20.14% | 17.82% | – | 0.64% | 15,129 |
| Bank of India Small Cap Fund | 18.86% | 19.25% | 18.36% | – | 0.81% | 3,105 |
| Quant Small Cap Fund | 5.77% | 16.71% | 16.81% | 20.09% | 0.92% | 35,054 |
| Category median | 2.85% | 13.45% | 13.43% | – | – | – |
Returns of a year or more are compounded annual rates. Bandhan Small Cap Fund leads the median by 8.99 points a year over three years, and ITI Small Cap Fund follows at 22.05%.
Risk: what the lead cost
| Fund | Volatility (3 yr) | Worst fall (3 yr) | Sharpe ratio | Alpha vs Nifty Smallcap 250 TRI |
|---|---|---|---|---|
| Bandhan Small Cap Fund | 17.4% | −22.8% | 0.92 | 8.6% |
| ITI Small Cap Fund | 19.3% | −24.2% | 0.80 | 8.8% |
| Invesco India Small Cap Fund | 18.0% | −23.4% | 0.76 | 7.5% |
Volatility is the annualised standard deviation of daily returns; the worst fall is the deepest peak-to-trough drop in the last three years. The Sharpe ratio uses a 6.5% risk-free rate. Alpha is the fund's return above what its beta to the benchmark predicts.
What a monthly SIP earned
| Fund | 3-year SIP return (a year) | 5-year SIP return (a year) |
|---|---|---|
| Bandhan Small Cap Fund | 10.44% | 20.62% |
| ITI Small Cap Fund | 13.15% | 21.01% |
| Invesco India Small Cap Fund | 11.35% | 19.06% |
| Category median | 7.11% | 13.54% |
SIP returns are annualised (XIRR) for ₹10,000 a month. They differ from lump-sum returns because each instalment buys at a different price.
Same rule, different crowns
4 different funds take the five measures below, which is the point: the answer depends on what you ask.
| Measure | Fund | Value |
|---|---|---|
| Best 1-year return | Bank of India Small Cap Fund | 18.86% |
| Best 5-year return | Bank of India Small Cap Fund | 18.36% |
| Lowest expense ratio | Tata Small Cap Fund | 0.53% |
| Lowest volatility | SBI SMALL CAP FUND | 14.2% |
| Highest Sharpe ratio | Bandhan Small Cap Fund | 0.92 |
Small caps have rewarded patience over three years and tested it along the way. The worst fall inside the last three years is about a quarter of the fund's value for every fund shown, so anyone reading a 22% annual return should read the drawdown beside it.
More in this series
Best large cap fund · Best mid cap fund · Best flexi cap fund · Best ELSS fund · Best aggressive hybrid fund · Best multi asset fund · Best large and mid cap fund · Best short duration fund · Best gilt fund
What this ranking cannot tell you
It looks backward over a single window. It ignores the fund house, the manager's tenure, the portfolio and its overlap with what you already own. Past returns do not predict future ones, and a fund's rank can change with the next month's NAV. For any fund here, open its page to see the full record, and use the compare tool to set two side by side. This is a data read-out, not advice to buy or sell.
Frequently asked questions
Which is the best small cap fund in India in 2026?
On this rule (open-ended, at least ₹1,000 crore AUM, a 5-year record, ranked by 3-year return, Direct plan, Growth option), Bandhan Small Cap Fund, at 22.44% a year to 27 October 2026, against a category median of 13.45%. A different rule can give a different answer.
Does the best small cap fund by 3-year return also lead over 1 and 5 years?
Not entirely. Among the eligible funds, Bank of India Small Cap Fund leads over one year at 18.86% and Bank of India Small Cap Fund leads over five years at 18.36%; Bandhan Small Cap Fund returned 2.79% and 18.12%.
Which small cap fund has the lowest expense ratio?
Tata Small Cap Fund, at 0.53% for the Direct plan among the eligible funds. Bandhan Small Cap Fund charges 0.65%.
This is commentary on published data, not investment advice. WealthTicker is not a SEBI-registered adviser or distributor. Figures are WealthTicker’s own calculations from public data — AMFI’s fund NAVs and disclosures, NSE’s index and FII/DII files, and the fund houses’ monthly portfolios (how we calculate). They are as of the dates stated and can be revised by their source.
Keep reading
Best flexi cap fund in 2026: Bank of India leads
Best flexi cap fund of 2026 on one rule: Bank of India Flexi Cap Fund at 18.16% a year over 3 years vs a 11.56% median. Top five, risk, SIP.
Best large and mid cap fund in 2026: Invesco India leads
Best large and mid cap fund of 2026 on one rule: Invesco India Large & Mid Cap Fund at 20.78% a year over 3 years vs a 12.68% median. Top five, risk, SIP.
Best large cap fund in 2026: Invesco India leads
Best large cap fund of 2026 on one rule: Invesco India Large Cap Fund at 13.67% a year over 3 years vs a 9.98% median. Top five, risk, SIP.