Despite a challenging September for small-cap mutual funds, several schemes outperformed expectations, highlighting enduring potential over the long term amid broad market pressures.
September was a difficult month for small-cap investors, with only four schemes in the category managing to finish in positive territory. Data from Value Research, as reported by Business Today, showed the average small-cap fund lost 2.59% in September 2026, while the small-cap index fell 3.12%, underscoring broad pressure across the segment. Even so, the one-year picture remained more constructive, with the category still ahead by 9.92%.
At the top of the monthly table, Samco Small Cap Fund led the category with a 6.20% gain. Bank of India Small Cap Fund was the only other scheme with a gain above 1%, while Tata Small Cap Fund and Groww Small Cap Fund also posted modest advances. Most of the rest of the universe finished lower, with Quant Small Cap Fund down 0.74%, Bandhan Small Cap Fund off 0.85% and ICICI Prudential Small Cap Fund falling 0.99%, according to the same data compiled from Value Research.
The losses were steeper further down the list. Edelweiss Small Cap Fund recorded the sharpest drop at 5.03%, followed by UTI Small Cap Fund at 4.22% and SBI Small Cap Fund at 3.79%. Canara Robeco Small Cap Fund and Invesco India Small Cap Fund also lagged, slipping 3.89% and 3.30% respectively. LiveMint reported that September was a weak month across equity funds more broadly, with large-, mid-, small- and flexi-cap categories all declining, although small-cap funds held up better than mid-caps, which fell more sharply.
The longer-term numbers were still strong for several funds, even after the September setback. Bank of India Small Cap Fund posted a one-year return of 29.25%, narrowly ahead of TRUST MF Small Cap Fund at 29.14%. Motilal Oswal Small Cap Fund returned 20.88% over one year, while Union Small Cap Fund gained 20.55%. At the weaker end, HDFC Small Cap Fund and Tata Small Cap Fund were the only schemes in the table with negative one-year returns. The category’s resilience over longer periods echoes broader market data: LiveMint said small-cap funds delivered annualised returns of 14% over three years and 14.5% over five years, slightly behind mid-caps over the longer five-year stretch, but still among the strongest equity fund groups.
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