Summary of "Comparing Top 3 Small Cap Funds | Best Small Cap Fund to Invest in 2026?"
Comparing Top 3 Small Cap Funds | Best Small Cap Fund to Invest in 2026?
Funds Discussed
- Bandhan Small Cap Fund
- Nippon India Small Cap Fund
- Quant Small Cap Fund
- Grow Small Cap Fund (New Fund Offer open till January 2, 2026) by Groww Mutual Fund
Performance Metrics & Returns
Bandhan Small Cap Fund
- 1-year return: 6.39% (positive despite Nifty Smallcap 250 Index at -9%)
- 3-year CAGR: 30.97%
- 5-year CAGR: 26.14%
- Not yet 10 years old (no 10-year data available)
Nippon India Small Cap Fund
- 1-year return: 0.20%
- 3-year CAGR: 21.19%
- 5-year CAGR: 26.45% (slightly higher than Bandhan over 5 years)
- Beta: 0.85 (lowest among compared funds)
- Standard deviation: Lowest (indicating less volatility)
Quant Small Cap Fund
- 5-year CAGR: 28.19% (highest among the three funds)
Market Benchmark
- Nifty Smallcap 250 Index: -9% (1-year return, reflecting negative market context)
Risk & Return Ratios
Metric Bandhan Small Cap Fund Nippon India Small Cap Fund Quant Small Cap Fund Alpha (excess returns) 14.64 (highest) Lower Lower Beta (market sensitivity) Higher 0.85 (lowest) Higher Standard Deviation (volatility) Higher Lowest Higher Sharpe Ratio (risk-adjusted return) 0.19 (highest) Lower Lower Sortino Ratio (downside risk protection) 0.02 (highest) Lower LowerExpense ratio was noted but not considered a decisive factor in the comparison.
Additional Analysis: Rolling Returns (3-year periods over last 5 years)
- All three funds consistently outperformed the small cap category average.
- Bandhan Small Cap Fund showed a strong upward trend in recent periods, consistently outperforming others.
- Bandhan never had rolling returns below 20% during the observed period.
- Nippon India and Quant funds exhibited more fluctuating performance, sometimes outperforming each other.
Macroeconomic & Valuation Context
- Small cap valuations are currently moderate:
- Price to Earnings (PE) ratio: 29.25 (down from 33.41 a year ago)
- 5-year median PE: 28.93
- This indicates there is room for growth in small caps going forward.
New Fund Highlight: Grow Small Cap Fund
- NFO open until January 2, 2026
- Fund Manager: Mr. Anupam Tiwari (noted for successful management of Axis Small Cap Fund and Axis Multicap Fund)
- Fund Strategy: KGARP (Quality Growth at Reasonable Price)
- Identify high quality, high growth companies
- Use valuation and growth potential for investment decisions
- Position sizing based on expected risk-reward
- True-to-label small cap fund with minimum 65% allocation to small and mid caps, zero large cap allocation
Recommendations & Cautions
- Bandhan Small Cap Fund is currently the best performer among the three, with strong alpha, Sharpe ratio, and consistent rolling returns.
- Nippon India Small Cap Fund offers lower volatility (beta and standard deviation) and is a solid choice for risk-averse investors.
- Quant Small Cap Fund leads on 5-year CAGR but has shown less consistency in recent rolling returns.
- Investors should avoid selecting funds solely based on past returns; fundamental parameters like alpha, beta, Sharpe, Sortino, and rolling returns are crucial.
- Expense ratio should be noted but not overemphasized.
- For new small cap investors, Bandhan Small Cap Fund is recommended with periodic performance reviews (every 6 months).
- Existing investors in Nippon India or Quant funds should not exit solely due to recent underperformance; these funds have strong track records.
- Adding Bandhan Small Cap Fund as a second small cap fund in a portfolio is a viable diversification strategy.
- Always perform your own due diligence and read scheme documents before investing.
Disclosures
Past performance is not indicative of future results. This video is for informational purposes only and does not constitute financial advice.
Presenter
- Ranjan (Your Everyday Guide)
Summary
This video compares three top Indian small cap mutual funds—Bandhan Small Cap Fund, Nippon India Small Cap Fund, and Quant Small Cap Fund—using key metrics such as returns, alpha, beta, Sharpe ratio, Sortino ratio, and rolling returns. Bandhan Small Cap Fund emerges as the top performer with strong risk-adjusted returns and consistent rolling returns above 20%. Nippon India offers lower volatility, while Quant leads on 5-year CAGR but with less consistency recently. The macroeconomic context shows small caps are moderately valued, presenting growth opportunities. The new Grow Small Cap Fund, managed by a proven fund manager, is introduced as a promising option. Investors are advised to focus on fundamentals, monitor performance regularly, and diversify rather than chase returns alone.
Category
Finance
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