Best small cap mutual funds to invest in June 2025
Small cap mutual funds
that invest in the stocks of very small companies have given over 26.38% in 2024. In April 2025, the small cap funds again gained investors' interest and received an inflow of Rs 3,999 crore.
The talk about the higher valuations in the small cap space and the recent volatility in the market are forcing many investors to accept that a correction may be around the corner. Mutual fund managers and advisors say the valuations are rich but investors can continue to invest in small cap schemes to create wealth over a long period. According to many mutual fund advisors, even though the small cap segment has run up a lot in the last six months, investors can still invest in these schemes in a staggered manner to create wealth over a long period.
Also Read |
MF Tracker: Will this Rs 30,000 crore smallcap fund continue to maintain its long-term performance?
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
View
Details
»
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
Unsold Container Homes in Cebu - Prices You Won't Believe!
Shipping Container Homes | Search Ads
Search Now
Undo
Small cap schemes invest in very small companies or their stocks. According to the Sebi mandate, small cap schemes must invest in companies that are ranked below 250 in terms of market capitalisation. These schemes also will have to invest at least 65% in small cap stocks. Small companies go through many ups and downs - more than the established companies in the large and mid cap segments. That is why investing in small cap stocks is considered extremely risky; the small cap segment can also be extremely volatile, especially in the short term. That is why small cap schemes are recommended only to aggressive investors with a very high risk appetite and very long investment horizon.
Should you invest in small cap funds?
Are you wondering why anyone would take so much risk investing in small cap schemes? These schemes also have the potential to offer very high returns over a long period. For example, the small cap category offered an average return of 19% over 10 years. However, to pocket such fabulous returns you must be prepared to take so much risk and volatility.
Live Events
It is not very easy to identify winners in the small cap segment. Many of these companies are unknown. They are also under-researched. Their management can be unscrupulous and they can make big claims that can be bogus. Sometimes the management along with market operators can drive up prices. These are some of the reasons why the market rewards and punishes these companies disproportionately.
If these companies succeed, the market will be after these stocks and investors will suddenly have multi-baggers in their portfolio. However, if they falter, the stocks would be severely punished. Overnight the stocks can become absolute dud.
In short, investing in small caps is not a child's play. You will have to find successful fund managers who specialise in small cap stocks. You should also pay attention to how the schemes fared during the market downturn.
Also Read |
9 equity mutual funds offer over 20% CAGR in seven years. Are there any included in your portfolio?
Here are some small cap schemes you can invest to create wealth over a long period. Follow our monthly updates to keep track of the performance of these schemes. Axis Small Cap Fund has been in the third quartile for 25 months now. The scheme had been in the fourth quartile for two months before that.
SBI Small Cap Fund has been in the third quartile for the last 14 months. Kotak Small Cap Fund has been in the fourth quarter in the last month. The scheme had been in the third quartile earlier. Nippon India Small Cap Fund had been in the first quartile for the last two months
Best small cap funds to invest in June 2025:
Axis Small Cap Fund
SBI Small Cap Fund
Kotak Small Cap Fund
Nippon India Small Cap Fund
Our methodology:
ETMutualFunds has employed the following parameters for shortlisting the Equity mutual fund schemes.
1. Mean rolling returns:
Rolled daily for the last three years.
2. Consistency in the last three years:
Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of returns is said to be a geometric Brownian time series. This type of time series is difficult to forecast.
ii) When H <0.5, the series is said to mean reverting.
iii) When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk:
We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance:
It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme =
[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
5. Asset size:
For Equity funds, the threshold asset size is Rs 50 crore
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hans India
37 minutes ago
- Hans India
HDB Financial Services IPO Opens June 25: Price Band Set at Rs 700–740 Per Share
HDB Financial Services, a company under HDFC Bank, is launching its Initial Public Offering (IPO) on June 25. Even before it opens, the company's shares are being traded in the grey market with a premium of Rs 47–48, or about 6.35%, above the IPO price. Earlier, shares in the unlisted market were selling for Rs 1,200 to Rs 1,350. This was much higher than the IPO's upper price of Rs 740 per share. At the top price, the company is valued at around 3.72 times its book value. This is close to the value of other NBFCs like Bajaj Finance and Shriram Finance. Experts say the pricing is careful and fair for large investors. Experts also believe this is a good IPO to consider. They point to the company's strong background, known brand, solid risk management, and high credit ratings. The company is one of the biggest NBFCs in the country and serves a large number of customers. Analysts think it will grow well and keep improving its asset quality. The IPO will raise Rs 12,500 crore, which includes Rs 2,500 crore as fresh shares and Rs 10,000 crore as an offer for sale by current shareholders. The price band is set between Rs 700 and Rs 740. People can apply for a minimum of 20 shares, and more in multiples. Some shares are kept aside for employees and HDFC Bank shareholders. Employees can buy from a pool worth Rs 20 crore, and shareholders from a pool worth Rs 1,250 crore. At the highest price, the total market value of the company could be around Rs 61,388 crore. The IPO is managed by a large group of financial firms. The registrar of the issue is MUFG Intime India.
Hindustan Times
40 minutes ago
- Hindustan Times
ASUS unveils TUF and ROG 2025 gaming laptops lineup in India
ASUS launches new TUF and ROG gaming laptops in India with NVIDIA GeForce RTX 50 series graphics, featuring Intel and AMD processors. Models include F16, A16, Strix G16, and Zephyrus G14, targeting gamers and creators with prices ranging from Rs. 1,44,990 to Rs. 1,84,990.
India Today
41 minutes ago
- India Today
Explained: Why many low-income Indian households still rely on moneylenders
India's financial inclusion story has moved forward in many ways over the past decade. More people have bank accounts, digital payments are part of daily life, and fintech has made financial services easier to access. But for many low- and middle-income households, especially those earning under Rs 5 lakh a year, borrowing money remains a challenge. When cash runs short, they still turn to the local moneylender, the nearby shopkeeper, or friends and banking may have reached their neighbourhoods, but formal credit hasn't. A new report from Piramal Enterprises, based on CMIE's Consumer Pyramid Household Survey, brings this gap into focus. The report, authored by Debopam Chaudhuri, Chief Economist, Piramal Enterprises, shows that while access to the banking system has grown, access to credit remains uneven and out of reach for low-income households, informal loans are still far more common than formal ones. In 2021, these households borrowed 2.6 times more from informal sources than from banks or NBFCs. For comparison, that ratio is 0.6 in Brazil and just 0.27 in the US. (Insights from Piramal study) INFORMAL LOANS ON THE RISEThings look even more worrying for those at the bottom of the income ladder. Households earning under Rs 2 lakh a year saw formal borrowing fall by over 4% a year between FY19 and FY23. Informal borrowing in the same group grew by almost 6% each in the Rs 2–10 lakh range, more households are turning to both formal and informal credit. In other words, banks aren't replacing moneylenders; they're just another option, often not the explains this persistent pull of the informal credit system?One big reason is that many borrowers simply don't fit into the banking system's boxes. They don't have stable jobs, payslips, or a strong credit the pandemic hit, reverse migration increased the number of people in agricultural and informal work — jobs that banks view as risky. These workers needed credit, but banks stepped back. Informal lenders moved in, as they always problem is that borrowing informally often comes with steep costs. Interest rates are high, there are no clear rules, and if things go wrong, there's little protection. It can trap families in cycles of debt that are hard to also plays a role. Southern states like Kerala, Tamil Nadu and Karnataka have higher levels of formal borrowing, partly due to the popularity of gold loans and wider fintech use. But in states like Bihar, Jharkhand and West Bengal, more than half of all households still depend on informal sources. Even Punjab, which traditionally had a more stable credit profile, is now seeing a shift towards informal matters too. Daily-wage workers are among the most excluded. Over 55% of households in this group rely on informal loans, as banks tend to see them as too risky. The same is true for many self-employed people, especially those running small businesses. Banks often hesitate to lend to them. As a result, more of these households depend on non-institutional the other hand, salaried professionals and industrial workers have seen better access to formal loans, especially with the rise of digital lending platforms. These borrowers usually have more paperwork, better credit scores, and more predictable income. That makes them more and microfinance institutions are filling some of the gaps, especially in small towns and rural areas, added the report. But their growth has limits. They face higher funding costs, tighter regulations and less room to Debopam Chaudhuri notes in the report, 'India's financial inclusion story has delivered impressive gains in access, but the next chapter must focus on usage, especially timely, affordable and appropriate credit. For millions of informal workers, small entrepreneurs and rural households, NBFCs are the only bridge to formal finance. Strengthening them is essential to close the credit gap.'He adds, 'Without formal credit at the last mile, especially for self-employed and blue-collar workers, India risks widening the credit divide. Informal borrowing not only carries higher costs but lacks regulatory protection, which undermines long-term household resilience.'The Piramal report calls for more support to strengthen these lenders, suggesting measures like giving strong NBFCs more options to raise funds, improving their access to affordable capital, and simplifying the rules around loan recovery for small borrowers. These steps could help them reach more people who are currently left out of the formal system. advertisement
