May 24, 2024 5 min read

Is It Good to Invest in Small Cap Fund Now?


Now is the right time to start investing in Mutual Funds, but is it the right time for a small cap mutual fund or not? Let’s figure out if this category has the potential to be in your portfolio. Stay till the last to get Top Small Cap Fund to invest in.

Performance of the Small Cap Mutual Funds?

Over the last three years, small cap funds have outperformed large cap funds in 2023, they had an amazing 42.79% return as compared to 24.92% for large-caps.

This strong performance has been driven by economic recovery and earnings growth in smaller companies, leading to record inflows of over ₹5,400 crore into small-cap funds in June 2023.

Long term prospects for small cap funds remain bright despite some short-term volatility, particularly in industries like manufacturing, logistics, supply chain, and infrastructure, which are bolstered by programs like Made in India and production-linked incentive programs.

Though Indian business growth is high in the world, but experts believe some small corrections are needed in the market especially for small caps due to high valuations in some companies.
so investors should not lose hope but invest cautiously and keep expectations realistic

So let's check what opportunities and factors to consider for cautious small cap investing

Check the Performance of Small Cap Mutual Funds Now!

Key Opportunities Small Cap Companies Have

Small cap companies have great potential for growth, despite being riskier and more volatile. Here's why:

1. Growth Potential

  • Growing Phase: Small-cap firms are often in their early stages of growth, which means they can offer higher returns compared to bigger, more established companies.
  • Undervalued: These companies aren't as closely watched by experts, so they might be undervalued in the market.

2. Economic Recovery

  • Benefit from Recovery: They tend to do well when the economy is picking up because they can quickly adapt to changes.
  • Earnings Growth: When the economy is doing better, small-cap companies usually see a big increase in their profits.

3. Government Support

  • Helpful Policies: Government programs like "Make in India" and incentives for production help industries where small-cap companies are active, like manufacturing and logistics.
  • Infrastructure Growth: More government spending on infrastructure projects benefits small-cap companies in those sectors.

4. Sector-Specific Growth

  • Manufacturing: Small-cap companies in manufacturing are expected to grow a lot due to higher demand both locally and internationally.
  • Technology and Innovation: Many small-cap firms are leaders in new technology and innovation, offering unique products and services that can do well in niche markets.

5. Investment Opportunities

  • Diversification: Adding small-cap companies to a portfolio spreads out risk, which can be helpful when investing in different types of assets.
  • Long-Term Benefits: Even though there might be ups and downs in the short term, investing in small-cap companies for the long haul can lead to big returns over time.

Here Are the List of Trending Blogs You Should Read. 

What Should You Do Now?

Now comes the main question of how to earn some profits from small cap funds:

1. New Investors Should Plan for 5 Years and More  

As a new investor if you want to taste the higher returns of small cap mutual funds then you must have a vision of at least 5 years or more because this time frame will allow you to adapt to the market volatility and also benefit from the growth potential of small cap companies.

 2. SIP Investors: Continue Your Plan

Investing in small cap schemes becomes easier with the help of a systematic investment plan. You don’t need to invest a whole lump-sum amount at once and this Systematic plan will also reduce the impact of market fluctuations. Maintain discipline with your long-term SIPs to build wealth over time.

Become the Part of Next Big Small Cap Company Start Your SIP Now.

3. Keep patience & have a tolerance of 30% risk

Small cap funds are also known for their volatility they may have 30% or greater declines. It is important to have both patience and a strong risk tolerance. Remember that these funds have the capacity to deliver higher long term returns.

4. Do Not Sell All Small Cap Funds - Sell Only Underperforming Funds

Remember: During the bear markets, it's best to avoid having the urge to sell off your small cap assets. Rather than, review your portfolio and consider selling only the consistently underperforming investment.

Gain Clarity and Confidence. Consult our Experts Today!

5. Long Term Investors Do Additional Purchase During Market Falls.

Market corrections are purchasing opportunities for long-term investors. When the market is down, think about purchasing more small-cap funds to increase your potential returns and get more units at a cheaper price.

6. Consider a Diversified Portfolio of Small Cap Funds.

Diversification is an important risk management strategy. It helps to diversify your assets among many small-cap funds that focus on different sectors and businesses. This technique reduces the effect of poor performance in any one sector while also providing balanced exposure to the overall growth potential of small cap companies.


Small-cap funds offer a chance for big growth, but there is risk involved. These funds invest in smaller companies that have lots of room to grow, which can lead to higher returns. But remember, small-cap investments can be more unpredictable. So, it's important to think long-term and be patient. Using SIP can help you invest regularly and stay on track, even when the market is up and down. By adding small cap funds to your investment mix and using SIPs, you can aim for better returns while managing risks carefully.

As promised here are Your Best Performing Small Cap Funds list……Which Small Cap Fund is Best in 2024?


Best Funds

Top funds 1M Return 6M Return 1Y Return 3Y Return 5Y Return
  • 1M Return
  • 6M Return
  • 1Y Return
  • 3Y Return
  • 5Y Return
Nippon India Small Cap Fund - Growth Plan - Growth Option -1.07% 13.49% 49.3% 31.98% 27.99% Invest
HSBC Small Cap Fund - Regular Growth -3.14% 10.29% 42.45% 30.36% 22.23% Invest
Bandhan Small Cap Fund - Regular Plan - Growth -1.94% 24.4% 62.7% 26.73% 0% Invest
Quant Small Cap Fund-Growth 0.79% 27.03% 60.88% 40.91% 35.05% Invest
View All Funds
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