Archive · 14 Sep 2026
Small-Cap Funds: High Returns Come With Varied Volatility
Small-cap mutual funds invest in smaller companies.
These funds can earn strong returns, but their prices may move up and down more sharply.
Bandhan Small Cap Fund had the best three-year return among the 10 largest funds studied.
Invesco India Small Cap had the best five-year return.
Axis Small Cap had the most stable performance based on standard deviation.
Bandhan’s returns were higher, but its performance fluctuated more than some other funds.
Investors therefore need to consider both returns and volatility.
A fund with lower volatility may feel less bumpy, even if its returns are not the highest.
Past performance does not by itself show how risky a fund is.
Bandhan Small Cap Fund led the 10-fund group with a 24.38% three-year annualised return.
Invesco India Small Cap posted the highest five-year return at 20.49%, narrowly ahead of Bandhan at 20.13%.
Axis Small Cap had the lowest three-year standard deviation at 16.81%, indicating the least volatility among the funds compared.
Bandhan delivered the highest three-year return but had relatively high volatility, with a standard deviation of 20.45%.
Only Bandhan, DSP, and HSBC had volatility above the category average standard deviation of 20.25%.
- Who
- The 10 largest small-cap mutual funds by assets under management, including Bandhan Small Cap Fund, Invesco India Small Cap Fund, Axis Small Cap Fund, and others.
- What
- The comparison examines the funds’ three-year and five-year returns alongside their three-year standard deviation, a measure of volatility.
- When
- Assets under management were measured on 31 August 2026; returns were calculated as of 11 September 2026; the article cites net inflows for August 2026.
- Where
- The comparison covers the Indian small-cap mutual fund category.
- Why
- To assess whether funds with higher returns also delivered those returns with relatively lower volatility.
- August 2026 category inflow
- ₹7,973 crore, the highest among active equity fund categories
- Top three-year return
- Bandhan Small Cap Fund: 24.38% annualised
- Top five-year return
- Invesco India Small Cap Fund: 20.49% annualised
- Lowest standard deviation
- Axis Small Cap Fund: 16.81%
- Highest standard deviation
- HSBC Small Cap Fund: 21.81%
- Category average standard deviation
- 20.25%
- Data basis
- Direct plans; top 10 funds ranked by AUM; AUM measured on 31 August 2026