Despite a flat Nifty, Motilal Oswal Small Cap Fund delivered a 15% return over two years, demonstrating resilience and strategic agility as active managers adapt to a volatile market environment.
A flat-looking Nifty masked a far more uneven two years for equity investors, and one of the clearest examples was Motilal Oswal Small Cap Fund. According to The Hindu BusinessLine’s analysis, the fund returned about 15 per cent over the two years to August 10, 2026, comfortably ahead of the Nifty Smallcap 250 TRI’s 3.5 per cent annualised gain. Motilal Oswal’s own fund data show the scheme remained a high-risk small-cap product with assets running into thousands of crores, underlining how strongly investors have continued to back active stock-picking even in a choppy market.
The wider lesson from the period is that the headline index told only part of the story. The Hindu BusinessLine said the Nifty 50 delivered annualised price returns of just 0.4 per cent over the period, yet mid- and small-cap segments did notably better, with the Nifty Midcap 150 TRI and Nifty Smallcap 250 TRI advancing 6 per cent and 3.5 per cent respectively. In that environment, active equity funds showed sharp dispersion: more than half beat their benchmarks, but many others lagged badly, making portfolio construction and timing far more important than broad market direction.
Motilal Oswal Small Cap Fund stood out not simply because it owned small-cap names, but because its style appears to have matched the market’s rhythm. The BusinessLine analysis said the fund posted an upside capture ratio of 117 per cent and a downside capture ratio of 75 per cent, meaning it participated strongly in rallies while losing less than the benchmark in weaker phases. That combination helped it outpace peers such as Nippon India Small Cap and ICICI Prudential Smallcap, which both lagged despite large portfolios, while Bandhan Small Cap managed to outperform with a similarly broad spread of holdings.
The fund’s current profile also helps explain why it remains closely watched. Motilal Oswal’s website says the Direct-Growth plan had assets of ₹6,206.07 crore as of June 8, 2026, while ET Money put assets at ₹7,179 crore on July 27, 2026 and noted a since-inception annualised return of 20.71 per cent. Those figures reinforce the point that scale has not prevented the fund from delivering strong results, though they also show why investors need to distinguish between a short-term outperformance streak and a long-term repeatable record.
More broadly, the two-year period rewarded managers who were willing to shift decisively, avoid weak holdings and accept that protection mattered as much as aggression. The BusinessLine analysis said the best active funds often paired decent participation in upswings with better control of losses in sell-offs, while the category as a whole benefited from resilient domestic inflows and rising systematic investment plan contributions. In other words, the market did not reward simple beta exposure; it rewarded conviction, discipline and the ability to adapt.
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