The first half of 2026 was tumultuous one for the Indian equity market as the world witnessed a highly uncertain environment amid the US Iran war, the impact of AI on jobs and IT sector growth, US tariff threat, etc.
This resulted in rising crude prices, a weak rupee, and FII selloff.
But despite a highly uncertain environment small cap mutual funds dominated the returns chart. It was the top performing category of H1 2026, followed by mid cap funds and multi cap funds.
Large cap funds on the other hand faced the brunt of heavy selling of bluechips by FIIs.
As a result, most schemes in the large cap fund category delivered negative returns.
The small cap segment benefitted from investors lapping up stocks after last year’s underperformance which had resulted in better relative valuation for several companies.
In this editorial, we look at the top performing small cap funds of H1 2026, selected based on year-to-date returns.
#1 Bank of India Small Cap Fund
Bank of India Small Cap Fund delivered absolute returns of 21.9% compared to the benchmark Nifty Smallcap 250 – TRI’s 6.9% returns and the category average of 10.4%.
The fund was launched in December 2018.
The fund invested 80.9% of its assets in small caps, 13.1% in mid caps, and just 1.5% in large caps.
Its top stocks are Wockhardt, Sky Gold and Diamonds, Acutaas Chemicals, Lloyds Metals & Energy, and Quality Power Electrical Equipments.
It carried a moderately high portfolio turnover ratio of 75-95% in the last few months.
#2 TRUSTMF Small Cap Fund
TRUSTMF Small Cap Fund delivered absolute returns of 20.3% compared to the benchmark Nifty Smallcap 250 – TRI’s 6.9% returns and the category average of 10.4%.
The fund was launched in November 2024. The fund invested 67.8% of its assets in small caps, 22.3% in mid caps, and just 1.8% in large caps.
Its top stocks are Navin Fluorine International, Multi Commodity Exchange of India, Acutaas Chemicals, Cemindia Projects, and Sai Life Sciences.
It carried a high portfolio turnover ratio of around 190% in the last one year.
#3 JM Small Cap Fund
JM Small Cap Fund delivered absolute returns of 17.5% compared to the benchmark Nifty Smallcap 250 – TRI’s 6.9% returns and the category average of 10.4%.
The fund was launched in June 2024.
The fund invested a major 91.9% of its assets in small caps with just 7% in mid caps and no exposure in large caps.
Its top stocks are Garware Hi-Tech Films, Acutaas Chemicals, Godfrey Philips India, TD Power Systems, Shaily Engineering Plastics.
It carried a moderate to high turnover ratio of 60-110% in the last one year.
#4 Union Small Cap Fund
Union Small Cap Fund delivered absolute returns of 17% compared to the benchmark Nifty Smallcap 250 – TRI’s 6.9% returns and the category average of 10.4%.
The fund was launched in June 2014. The fund invested 73.7% of its assets in small caps, 24.1% in mid-caps, and no exposure in large caps.
Its top stocks are GE Vernova T&D India, Acutaas Chemicals, Navin Fluorine International, Karur Vysya Bank, and Multi Commodity Exchange of India.
It carried a moderate turnover ratio of 45-80% in the last one year.
Conclusion
While the top-performing small cap mutual fund delivered an impressive return of 21.9% in the first half of 2026, the bottom-performing fund generated -0.6%.
The wide dispersion in performance highlights why fund selection is especially critical in the small cap space.
The returns in the small cap space can be highly volatile and liquidity too can become a challenge during market downturns.
So, rather than getting swayed by small cap funds that have delivered one-off stellar gains, investors should aim to focus on well-diversified funds with proven track record of delivering consistently sound risk-adjusted returns.
Prefer schemes that prioritise risk management by picking quality stocks rather than those that chase market trends.
Such an approach can help you navigate the inherent volatility and downside risk of the small-cap segment while staying aligned with their long-term wealth creation goals.
#Table Note: Data as of 01 July 2026
Returns are year-to-date (absolute %) calculated using the Direct Plan-Growth option.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.
Happy investing.
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