Despite recent underperformance compared to peers, Bandhan Small Cap Fund’s strong track record over three and five years highlights its resilience, with stock selection and sector tilts driving momentum amid market volatility.
Bandhan Small Cap Fund has continued to reward patient investors over longer horizons even as its near-term numbers have slipped behind the small-cap category, according to data compiled by Business Today. Over the three months to August 2026, the fund returned 6.71%, compared with the category average of 8.80%. Its six-month gain of 13.61% also trailed the broader small-cap average of 15.92%, while its one-year return of 8.05% came in just below the category’s 8.60%.
That short-term softness sits alongside a much stronger record over three and five years. Business Today said the fund delivered an annualised 25.35% over three years, far ahead of the category average of 16%, and 18.08% over five years versus 15.48% for the peer group. Other market trackers have also placed the fund near the top of the small-cap pack, with The Economic Times and Moneycontrol both reporting that it has been among the best performers in the category over the three-year period.
The fund’s annual performance has been notably uneven, which is typical of small-cap investing. It surged 52.45% in 2021, fell 6.13% in 2022, then rebounded with gains of 53.60% in 2023 and 43.12% in 2024 before slipping 1.13% in 2025. That volatility underlines the risks investors take when they move into the segment, even if the long-term trend remains positive.
According to Business Today, the fund’s edge has come mainly from stock selection rather than broad sector calls. Stock selection added 13.05% to returns over the measured period, while sector allocation had a marginal negative effect. Financial services was the biggest contributor, followed by basic materials and consumer cyclical stocks. As of June 2026, the fund had assets under management of Rs 28,466 crore and held 91.82% of its portfolio in equities, with a heavy bias towards small-cap names.
The portfolio also showed clear tilts relative to the category. Business Today said finance accounted for 13.30% of assets, above the category average of 8.12%, while the fund was overweight in banks, real estate, information technology, fast-moving consumer goods, textiles, and iron and steel. It was underweight in healthcare and capital goods. The latest portfolio update showed active repositioning, with 15 new buys, nine exits, 83 stocks seeing higher allocations and 39 reduced.
For investors, the message is less about panic and more about perspective. Business Today quoted an expert as saying that past returns should not be the only yardstick and that investors should judge the fund by risk, horizon, market-cap mix and personal goals. For existing systematic investors, staying invested through volatility can make sense, while new lump-sum investors may prefer to stagger entries over four to six weeks. The broader point is that recent underperformance does not necessarily signal a broken strategy, but the fund’s ability to keep turning strong stock picking into durable outperformance will remain the key test.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
