The Indian stock market is currently going through a phase of volatility, with the Nifty 50 and BSE Sensex hovering below their record highs.
After a good 2023 and 2024, midcaps and smallcaps corrected sharply. This was due to profit-booking, liquidity issues, and high PE multiples, leading investors back to largecaps.
Yet, structural growth for mid and small caps continues to stay intact.
These agile, domestic stocks trail the market in turbulent times only to bounce back with quickly when stability returns.
Mid-cap and small-cap mutual funds have beaten their large-cap counterparts over a complete market cycle, even though they are more volatile.
Market Momentum: Large vs Mid vs Small Cap Funds
Past performance is not an indicator of future returns.
(Source: ACE MF)
To mitigate volatility, a structured SIP-based investment in quality mutual funds is necessary. This will smoothen out the volatility and capture long-term growth for the investor.
In this editorial, we will look at the mutual funds that have delivered the highest returns in the last 10 years…
#1 Nippon India Small Cap Fund
Nippon India Small Cap Fund, launched in September 2010, has been a top performer in its segment over the long term.
Being a small-cap fund, the aim is to find businesses that are frequently under-covered, early stage in their growth cycle, and possibly undervalued.
This provides a high upside, but also more volatility, particularly in market downturns. It might not be ideal for conservative investors or those with short-term objectives.
The fund currently holds a corpus of Rs 580.28 billion (bn). On a rolling 10-year returns, the fund has delivered a CAGR of 23.52%.
The fund’s top stock exposure includes HDFC Bank Ltd. (2.2%), Multi Commodity Exchange Of India Ltd. (2%), and Dixon Technologies (India) Ltd. (1.3%).
The sector allocation is dominated by capital goods (11.9%), healthcare (8.2%), and chemicals (7.7%).
What differentiates this fund is its resilience in recovering strongly after correction. It fared well after the covid phase in 2020–2021 and in 2023 when small-caps picked up again.
#2 SBI Small Cap Fund
SBI Small Cap Fund is among the consistent performers in India’s small-cap mutual fund league.
Having entered the market in September 2009, it has gained a reputation for providing strong long-term performances through a concentrated, quality-based portfolio strategy.
Managed by R. Srinivasan and Mohan Lal, the fund seeks to spot budding companies with strong fundamentals and scalable business models.
The fund currently holds a corpus of Rs 317.90 bn. On a rolling 10-year returns, the fund has delivered a CAGR of 22.61%.
The fund’s top stock exposure includes SBFC Finance Ltd. (2.9%), DOMS Industries Ltd. (2.8%), and Krishna Institute of Medical Sciences Ltd. (2.5%).
Sector-wise, the fund’s portfolio is dominated by finance (8%), capital goods (7.5%), and chemicals (7.4%).
SBI Small Cap Fund balances aggressive growth potential with a conservative small-cap approach.
#3 Motilal Oswal Midcap Fund
Motilal Oswal Midcap Fund, launched in February 2014, is an equity mutual fund dedicated to mid-cap companies.
The midcap investing strategy is useful for generating outperformance in bull markets, though it can also generate higher volatility during corrections.
The fund currently holds a corpus of Rs 277.80 bn. On a rolling 10-year returns, the fund has delivered a CAGR of 21.17%.
The fund’s top stock exposure includes Persistent Systems Ltd. (10.5%), Coforge Ltd. (9.7%), and Kalyan Jewellers India Ltd. (8.1%).
The portfolio is dominated by sectors like IT (25.6%), diamond & jewellery (8.1%), and electricals (7.9%).
The scheme follows Motilal Oswal’s QGLP framework (Quality, Growth, Longevity, and Price), with a focus on fundamentally robust companies with stable earnings growth and scalable business models.
#4 HSBC Small Cap Fund
Following the takeover of L&T Mutual Fund by HSBC Asset Management in 2022, the fund was renamed from L&T Emerging Businesses Fund to HSBC Small Cap Fund. Its underlying investment philosophy remained intact along with fund management expertise.
Launched in May 2014, the fund currently holds a corpus of Rs 147.37 bn. On a rolling 10-year returns, the fund has delivered a CAGR of 21.16%.
The fund’s top stock exposure includes K.P.R. Mill Ltd. (2.38%), Neuland Laboratories Ltd. (2.13%), and Aditya Birla Real Estate Ltd. (2.08%).
The portfolio is dominated by sectors like finance (11.4%), healthcare (8%), and capital goods (7.6%).
While not being as old or as big as some of its peers, HSBC Small Cap Fund has fast made a name for itself. It has performed better than its benchmark—Nifty Smallcap 250 TRI—on a longer-term basis, reflecting experienced management and good portfolio building.
#5 Axis Small Cap Fund
Axis Small Cap Fund, one of India’s top small-cap equity mutual funds, is managed by Tejas Sheth, an experienced portfolio manager who is reputed to follow a bottom-up, quality-oriented investment strategy.
The scheme has consistently produced strong long-term returns while upholding a quality-first approach. It has been extremely resilient during times of market volatility because it tends to favour companies with robust cash flows, low leverage, and durable competitive advantages.
The fund currently holds a corpus of Rs 233.18 bn. On a rolling 10-year returns, the fund has delivered a CAGR of 20.74%.
The fund’s top stock exposure includes Krishna Institute of Medical Sciences Ltd. (3%), Cholamandalam Financial Holdings Ltd. (3%), and Blue Star Ltd. (2.8%).
The portfolio is dominated by sectors like healthcare (11.3%), finance (10.9%), and IT (6.5%).
The fund steers clear of speculative names, which has served to manage downside risks more effectively than some of its aggressive small-cap rivals. It’s a solid choice for investors who are seeking exposure to India’s growth stories without pursuing hype.
Performance of 5 Highest Return Mutual Funds in the Last 10 Years
Conclusion
As we progress through 2025, while intermittent volatility and macro struggles continue, the investment universe is still full of long-term possibilities.
Pursuing past winners is not typically successful in mutual fund investing. Markets change, and your strategy should too.
Rather than investing based on past performance, narrow down fund quality, manager consistency, and the alignment with your goals.
A consistent, well-researched, long-term plan is a more reliable way to create wealth. The key is not timing the best fund, but to remain invested with patience and discipline..
Happy investing.
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