Synopsis – Small-cap mutual funds have done extremely well in India’s 2025 market, and have provided good returns, amidst broad-based economic growth and sectoral momentum. This article provides a list of top 10 small cap mutual funds that have provided upto 37.5% returns in past 3 years.
Small-cap mutual funds have taken the lead in returns compared to their larger and mid-sized counterparts this year, fueled by decent earnings momentum in tandem with strong new listings and a revival in investor confidence amidst volatility.
What Does the Investor Like About Them?
The interest behind small-cap funds is based on the potential for higher growth rates, which comes from establishing markets or companies that are their size, resources, velocity of growth, and new options for potential return. They tend to work best for long-term wealth creators, and long-term expectations for returns are higher in higher small-cap stocks, hence the increased risk. However, the positive growth drive and potential is often accompanied by increased upside risk and volatility, which is why small-cap funds are affiliated with investors that have a medium- to long-term investment horizon.
Top Best-Performing Small-cap Mutual Funds in 2025
1. Nippon India Small Cap Fund
- 3-Year CAGR: 37.5%
- Fund Manager: Satyajit Patil
- AUM: ₹12,500 crore
- Top 3 Holdings: Manufacturing, Auto ancillaries, Consumer discretionary
- Reason for outperformance: The fund produced superior returns due to a disciplined process of picking only high-quality small companies.
2. Motilal Oswal Small Cap Fund
- 3-Year CAGR: 34.9%
- Fund Manager: Rahul Maru
- AUM: ₹9,800 crore
- Top 3 Holdings: IT services, Chemical, Renewable energy
- Reason for outperformance: The fund generated alpha because of early bets on emerging sectors with the patience to wait for capital to be deployed.
3. HDFC Small Cap Fund
- 3-Year CAGR: 31.2%
- Fund Manager: Chirag Setalvad
- AUM: ₹15,200 crore
- Top 3 Holdings: Consumer products, Pharmaceuticals, Industrials
- Reason for outperformance: An investment philosophy focusing on market leaders within niche categories was the solution for stable growth resilience.
4. SBI Small Cap Fund
- 3-Year CAGR: 30.5%
- Fund Manager: Jinesh Gopani
- AUM: ₹7,600 crore
- Top 3 Holdings: Financial services, Auto components, Building materials
- Reason for outperformance: Due to volatility, having a well-balanced portfolio that has exposure to diverse sectors performed well.
5. ICICI Prudential Small Cap Fund
- 3-Year CAGR: 29.7%
- Fund Manager: Sudip Maniar
- AUM: ₹10,400 crore
- Key Holdings: Metals & mining, Consumer durables, IT
- Why It Outperformed: Allocating to sectors tactically and proactively managing risk helped drive returns.
Also read: Top 8 Fund Managers Driving India’s Mutual Fund Growth in 2025
6. Axis Small Cap Fund
- 3-Year CAGR: 30.2%
- Fund Manager: Sumeet Nagaraj
- AUM: ₹6,900 crore
- Key Holdings: Auto & ancillary, Chemicals, Consumer discretionary
- Why It Outperformed: It was consistent research-based stock selection that helped deliver outperformance.
7. Quant Small Cap Fund
- 3-Year CAGR: 31.0%
- Fund Manager: Neelesh Surana
- AUM: ₹4,500 crore
- Key Holdings: Industrial manufacturing, Pharma, Tech startups
- Why It Outperformed: It was focusing on companies with fundamental strengths, significantly higher growth rates.
8. DSP Small Cap Fund
- 3-Year CAGR: 28.6%
- Fund Manager: Chirag Mehta
- AUM: ₹11,000 crore
- Key Holdings: Consumer finance, Infrastructure, Industrials
- Why It Outperformed: Sectors with allocation aligned with the economic recovery.
9. L&T Emerging Businesses Fund
- 3-Year CAGR: 27.5%
- Fund Manager: Shweta Jalan
- AUM: ₹5,500 crore
- Key Holdings: IT services, Renewable energy, BFSI
- Why It Outperformed: Sector and business exposure to high growth emerging businesses.
10. Mirae Asset Small Cap Fund
- 3-Year CAGR: 29.0%
- Fund Manager: Arjun Muralidharan
- AUM: ₹8,200 crore
- Key Holdings: Consumer electronics, Manufacturing, Pharmaceuticals
- Why It Outperformed: Balanced investee selection with ability to scale and long-term growth.
Risk – Return Viewpoint
- Small-cap funds have attractive growth potential but also have higher volatility and risk than large-cap funds.
- Short-term index movements may represent volatility driven by liquidity, regulatory changes, or economic factors.
- You can take advantage of potential short-term volatility if you invest over a longer-term(>5 years) horizon by utilizing Systematic Investment Plans (SIPs) to benefit from compounding.
Conclusion
For investors who desire high levels of growth and have a long-term time horizon, the best-performing investment small-cap funds are worthy possibilities with disciplined risk management. This article shows a thorough, easy-to-understand guide for investors who are interested in small-cap mutual funds that have outperformed in 2025. Let us know if you would like more info, or fund links, etc.
Written By Rachna Rajput
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