The question
The Nifty Smallcap 250 holds the 250 companies ranked 251 to 500 by market value. Eleven open-ended index funds copy it. Because they own the same shares, two numbers decide how good each one is: what it charges, and how much of the index's return it actually delivers.
Small caps are where that second number gets harder. The shares trade less, so buying and selling them costs more. Here is what the funds' records show.
Figures are Direct plan, Growth option, from daily NAVs to Friday 9 October 2026. Returns of a year or more are annualised. Funds on derived indices such as the Smallcap250 Quality 50 or Momentum Quality 100 track different stocks and are left out.
The eleven funds
| Fund | TER | Assets (₹ crore) | Since | 1 year | 3 years | Tracking error |
|---|---|---|---|---|---|---|
| Edelweiss | 0.32% | 272 | Dec 2022 | 3.69% | 13.49% | 0.27% |
| HDFC | 0.33% | 752 | Apr 2023 | 3.28% | 13.09% | 0.24% |
| Bandhan | 0.38% | 100 | Dec 2023 | 3.36% | — | 0.33% |
| JioBlackRock | 0.41% | 399 | Aug 2025 | 3.42% | — | — |
| Nippon India | 0.41% | 3,463 | Oct 2020 | 3.44% | 12.96% | 0.49% |
| ICICI Prudential | 0.44% | 775 | Nov 2021 | 3.22% | 13.08% | 0.26% |
| Kotak | 0.46% | 78 | Jan 2025 | 3.36% | — | — |
| Motilal Oswal | 0.46% | 1,271 | Sep 2019 | 3.47% | 13.39% | 0.22% |
| SBI | 0.51% | 1,759 | Oct 2022 | 3.23% | 13.11% | 0.23% |
| DSP | 0.60% | 16 | Dec 2025 | — | — | — |
| Groww | 0.64% | 138 | Mar 2024 | 3.64% | — | 0.25% |
TER is the latest Direct-plan expense ratio, disclosed between 30 September and 8 October 2026. Assets are AMFI's average for July to September 2026, all plans together. Tracking error measures how much the fund's monthly return wanders around the index's, annualised over the last 36 complete months.
Of ₹9,024 crore in the eleven funds, Nippon India's holds 38%, SBI's 20% and Motilal Oswal's 14%.
How far each fund trails the index
We measure each fund against the Nifty Smallcap 250 total return index, rebuilt from NSE's daily closing level and dividend yield in the same way our fund pages build their benchmark (methodology). It returned 4.05% over the year, 14.09% a year over three years and 13.67% over five. The price index alone returned 3.33%, 13.19% and 12.65%.
| Fund | 1 year | 3 years | 5 years |
|---|---|---|---|
| Edelweiss | −0.36 | −0.60 | — |
| Motilal Oswal | −0.58 | −0.71 | −0.82 |
| SBI | −0.82 | −0.98 | — |
| HDFC | −0.77 | −1.00 | — |
| ICICI Prudential | −0.83 | −1.01 | — |
| Nippon India | −0.61 | −1.14 | −1.11 |
Percentage points a year, fund minus index. Among the younger funds the one-year gap ran from −0.41 (Groww) to −0.69 (Bandhan and Kotak).
What stands out
Small-cap funds lose more on the way. Over three years the gaps run from 0.60 to 1.14 points a year. The seven Midcap 150 index funds with a three-year record trailed their index by 0.43 to 0.78. Fees are similar in both groups, so the extra is most likely trading cost: smaller companies have wider bid-ask spreads, and the index reshuffles every six months.
The largest fund has the widest gap. Nippon India's fund holds ₹3,463 crore, more than a third of the money, and trailed by 1.14 points a year over three years and 1.11 over five. Its tracking error of 0.49% is the highest of the group and sits just under the 0.5% line used by our index funds that actually track screen.
The cheapest fund has the best record. Edelweiss charges 0.32% and trailed by 0.60 points over three years, the narrowest gap. ₹10 lakh put into it on 9 October 2023 was worth about ₹14.62 lakh three years later; in Nippon India's fund it was about ₹14.41 lakh, roughly ₹21,000 less.
The falls were identical. Every fund with a three-year record dropped between 26.12% and 26.19% from its peak at its worst point in that time. An index fund does not soften a small-cap fall; small-cap fund drawdowns in 2026 shows how the active funds fared.
What the fee gap is worth over ten years
Take ₹10 lakh and a hypothetical 12% a year before costs, held for ten years:
| Fee | Return after fee | Value after 10 years | |
|---|---|---|---|
| Cheapest (Edelweiss) | 0.32% | 11.68% | ₹30.18 lakh |
| Dearest (Groww) | 0.64% | 11.36% | ₹29.33 lakh |
The fee alone costs about ₹85,000. The tracking table suggests the real gap between funds can be larger than the fee gap, because trading costs come on top. The lumpsum calculator runs the same sum with your own return and period.
The ETF route
Seven ETFs track the index too, with ₹3,030 crore between them. The largest is HDFC NIFTY Smallcap 250 ETF, with ₹2,670 crore at a TER of 0.26%; it returned 13.35% a year over three years, 0.74 points behind the index. ETFs need a demat account and trade at a market price, which in thinly traded small-cap ETFs can sit away from NAV.
What this does not tell you
Whether small caps belong in your portfolio at all. On 9 October the index's P/E was 34.03; its history is on the Nifty Smallcap 250 P/E page. Whether active small-cap funds have earned their higher fees is the subject of mid and small-cap: index funds against active funds.
How the five funds without a three-year record will track. One year is a short test for a small-cap index fund.
The exact gap to NSE's own TRI. Our rebuilt index spreads dividends evenly through the year. Read the gaps against each other rather than to the second decimal. The same comparison for the Nifty 50 is in Nifty 50 index funds: how far each trails the index, and the guide to tracking error explains the two measures.
Index data is from NSE Indices and expense ratios from AMFI. Every passive fund is listed on the index fund page. This is a description of past NAVs, not a recommendation.
Frequently asked questions
Which Nifty Smallcap 250 index fund has the lowest expense ratio?
Among Direct plans, Edelweiss Nifty Smallcap 250 Index Fund at 0.32% a year, then HDFC at 0.33% and Bandhan at 0.38%, from TERs disclosed between 30 September and 8 October 2026. The dearest is Groww at 0.64%.
How far do Smallcap 250 index funds trail the index?
Over the three years to 9 October 2026 the index's total return was 14.09% a year. The six funds with a record returned 12.96% to 13.49% a year, so they trailed by 0.60 to 1.14 points, more than the mid-cap index funds' 0.43 to 0.78.
What is the cost of picking the dearest Smallcap 250 index fund over the cheapest?
On ₹10 lakh growing at a hypothetical 12% a year before costs, a 0.32% fee leaves about ₹30.18 lakh after ten years and a 0.64% fee about ₹29.33 lakh, a gap of about ₹85,000.
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.
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