But a Systematic Investment Plan (SIP) asks something different.
You can keep writing the same cheque every month through a correction, because that is precisely when a SIP does its quiet compounding work. It buys more units while everyone else is selling.
In the Indian stock market, smallcap is the segment where SIP matters a lot, because this segment is volatile and it tests your patience. The category can run up 40% in a year and fall more the next.
But an SIP does not need you to predict the market. It just needs you to keep going.
So, the question is which smallcap fund should you rely on?
In this editorial, we look at 5 smallcap funds that have ranked highest in terms of SIP (XIRR) returns.
These schemes have been shortlisted based on the returns generated by a monthly SIP of Rs 10,000 over the five years to mid-September 2026, ranked by XIRR. We considered XIRR because it’s the return measure that accounts for the actual timing and size of each instalment.
All five funds have beaten the Nifty Smallcap 250 TRI on this measure by a wide margin, and all five beat the wider smallcap category average as well.
#1 ITI Small Cap Fund
First on the list is ITI Small Cap fund. It’s the newest fund house on this list with one of the more concentrated portfolios in the smallcap category.
ITI Small Cap Fund is managed by Dhimant Shah and Alok Ranjan, and the portfolio leans toward chemicals, engineering and financials, with Acutaas Chemicals, Multi Commodity Exchange, Wockhardt, Kirloskar Oil Engines, and Karur Vysya Bank among its largest positions.
The fund is mandated to keep at least 65% of assets in small-cap stocks at all times, the SEBI-mandated floor for the category, which leaves it comparatively little room to shelter in larger, steadier names during a downturn.
A monthly SIP of Rs 10,000 here over the five years to mid-September 2026 delivered the highest XIRR of 24.31%. This is much ahead of its peers and the Nifty Smallcap 250 TRI benchmark.
#2 Bandhan Small Cap Fund
Second is the most popular fund in Indian smallcap funds segment.
Bandhan Small Cap has grown the fastest in assets in recent years. It has delivered XIRR returns of around 23.5% in the period under our consideration.
Bandhan Small Cap Fund, formerly IDFC Small Cap Fund, is run by Manish Gunwani, Bandhan AMC’s Chief Investment Officer for Equities, alongside Kirthi Jain, with Ritika Behera and Gaurav Satra added to the team recently.
Gunwani joined in January 2023 after roles as CIO-Equities at Nippon India Mutual Fund, where he oversaw equity assets above Rs 1.2 tn, and Deputy CIO at ICICI Prudential AMC.
His stated approach is a three-filter process built around quality, growth and reasonable valuation, applied bottom-up by a research team of over fifty analysts.
The scale of the AUM growth under his tenure is genuinely striking: the fund managed roughly Rs 50 bn in 2023 and has grown to over Rs 300 bn by September 2026.
That kind of growth in a smallcap fund deserves scrutiny because bigger funds find it harder to build meaningful positions in small companies without moving their prices.
The portfolio’s disclosures suggest the team is managing that tension deliberately: the largest single holding was just 3.57% of assets as of the most recent factsheet, cash sat at close to 12.7%, and roughly a fifth of the portfolio sits in mid and large caps.
Its sector positioning leans toward financial services and realty, with lighter exposure to capital goods and autos than some category peers.
#3 Bank of India Small Cap Fund
Third is Bank of India Small Cap Fund with 22.6% XIRR returns.
This is the smallest fund house on this list by name recognition, and a case study in how a change of manager partway through a track record should be read.
Bank of India Small Cap Fund sits within Bank of India Investment Managers, formerly BOI AXA, a wholly owned subsidiary of the public sector bank.
The current managers are Alok Singh, who has run the fund since October 2024, and Nav Bhardwaj, added as co-manager in July 2025.
That means the five-year SIP outcome behind this fund’s place on this list was earned mostly by a different management team than the one running it today, and the portfolio has almost certainly changed shape since the handover.
The current portfolio holds Sky Gold and Diamonds, Quality Power Electrical Equipments, City Union Bank, Sterlite Technologies and Balrampur Chini Mills among its largest positions, spread across consumer cyclical, industrial, financial services, and materials rather than any one theme.
For a fund being considered for a fresh SIP rather than judged on history alone, the more relevant evidence is how the portfolio has performed since October 2024 which still reflects a prior manager’s decisions for most of its length.
#4 Invesco India Smallcap Fund
Fourth is Invesco India Smallcap Fund.
This is the largest fund on this list after Bandhan, and the one with arguably the most consistent record across time horizons.
Invesco India Smallcap Fund is managed by Aditya Khemani and Taher Badshah. Khemani joined from HSBC Asset Management and has been with Invesco since 2007, giving the fund house-level continuity that few smallcap teams can claim.
The portfolio’s largest holdings include Sai Life Sciences, Eternal, and Krishna Institute of Medical Sciences, tilting toward healthcare, pharmaceuticals, and consumer services.
What distinguishes this fund in a wider screen of the category is not any single period’s return, but that it has beaten the Nifty Smallcap 250 TRI across one, three, five, and seven-year rolling periods.
This is a pattern very few smallcap schemes show. A fund that wins occasionally might be lucky but a fund that wins on nearly every horizon measured is doing something repeatable.
The direct plan expense ratio of 0.41% is also among the lower end of the category for a fund of this size and track record, which compounds favourably alongside the returns over a multi-year SIP.
#5 Union Small Cap Fund
Last on the list is the oldest fund on this list by inception date.
Union Small Cap Fund is run by Gaurav Chopra and Pratik Dharmshi, both of whom took charge relatively recently, Chopra from November 2024 and Dharmshi from December 2024.
As with Bank of India Small Cap Fund, that means most of the five-year track record behind this fund’s place on this list reflects decisions made by a prior team.
The portfolio leans into auto ancillaries and industrial names, with Gabriel India, Karur Vysya Bank, Navin Fluorine International, RHI Magnesita India, and Kirloskar Oil Engines among the larger positions, alongside private banks such as Ujjivan Small Finance Bank and City Union Bank.
Of the five funds here, this is the one where the case for a fresh SIP rests most heavily on trusting the new management team to continue what their predecessors built.
Comparing the Five Funds
| Scheme | Benchmark | Inception | XIRR (5yr) | Rs 6 Lakh Became |
| ITI Small Cap Fund | Nifty Smallcap 250 TRI | Feb-20 | 24.34% | Rs 10.96 Lakh |
| Bandhan Small Cap Fund | BSE 250 Small Cap TRI | Feb-20 | 23.47% | Rs 10.73 Lakh |
| Bank of India Small Cap Fund | Nifty Smallcap 250 TRI | Dec-18 | 22.63% | Rs 10.52 Lakh |
| Invesco India Smallcap Fund | BSE 250 Small Cap TRI | Oct-18 | 22.23% | Rs 10.42 Lakh |
| Union Small Cap Fund | BSE 250 Small Cap TRI | Jun-14 | 20.33% | Rs 9.95 Lakh |
| Nifty Smallcap 250 TRI (benchmark) | – | – | 16.14% | Rs 8.98 Lakh |
Data Source: Ace MF
Conclusion
A SIP-based ranking like this one is a fairer test than a point-to-point return, because it captures what an investor actually experienced across 60 monthly instalments.
But what it cannot do is tell you who is managing the fund today. Two of the five funds here have had a change of primary manager within the past two years.
It is also worth remembering what a smallcap SIP is for. This is money that should not be needed for at least seven years, and the segment falls hardest and recovers slowest of any part of the market.
A strong five-year SIP number is evidence of a fund that has rewarded patience in the past. It is not a guarantee that the next five years, or even the next eighteen months, will look anything like it.
As always, evaluate the scheme’s investment mandate, the fund manager’s track record, costs, portfolio composition, and your own asset allocation and risk tolerance before drawing any investment conclusions.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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