Smallcap mutual funds are best performing funds with up to 16% return since last Diwali. Will it last?

Smallcap mutual funds have emerged as the best-performing mutual fund category since last Diwali, delivering returns of up to 16%, an analysis by ETMutualFunds showed. There were nearly 10 pure equity oriented mutual fund categories of which other categories ended in red.

The small cap mutual funds delivered an average return of 1.26% since the last Diwali celebrated on October 20, 2026. There were 31 small cap funds of which Bank of India Small Cap Fund delivered the highest return of 15.51% since the last Diwali. This was followed by TRUSTMF Small Cap Fund that gave 14.70% in the said time period.

DSP Small Cap Fund delivered 9.25% return in the said time period, followed by Motilal Oswal Small Cap Fund that gave 8.64% return in the similar period. Nippon India Small Cap Fund, the largest fund in the small cap category based on assets managed, delivered a negative return of 1.55% in the said time period.

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Will this performance last?

Shivam Pathak, CFP and Founder of Asset Elixir told ETMutualFunds that the long-term outlook for small-cap funds remains positive, but valuations call for caution and investors should invest gradually through SIPs, maintain a long-term horizon and keep small caps as a limited part of their equity portfolio.

Jasmeet Singh, Executive Director, Anand Rathi Wealth Limited shared with ETMutualFunds that we remain positive on small-cap segment from a medium to long-term perspective and recent market correction has helped valuations become more comfortable across market segments with negative froth of 16 to 20%, while improving earnings momentum especially in broader space like mid & small caps with 38% earnings growth in Q1 & strong initial ques in Q2 for small cap segments provides a strong fundamental supportive backdrop for equities and small cap segment.

“However, it is also important to consider that small caps generally tend to be more volatile and can see sharper corrections during periods of tighter liquidity and elevated global uncertainty. Therefore, investors should not look at the recent performance as a reason to aggressively increase exposure or attempt to time the bottom.”“For investors with a long-term investment horizon, the current correction provides an opportunity to gradually build exposure through SIPs or staggered investments with market cap allocation of 55:23:22 across large, mid and small caps by allocating across active diversified equity funds, which helps to get exposure across segments, sectors and helps to ride across market cycles while maintaining stability & liquidity in the portfolio,” Singh further said.

How other categories fared?

Among the other nine mutual fund categories, contra funds on an average lost the most of around 9.78%. There were three funds in the category in the said time period. Kotak Contra Fund lost the most of around 9.82%, followed by SBI Contra Fund and Invesco India Contra Fund that gave a negative return of 9.82% and 9.60% respectively.

Large cap funds on an average lost 9.34% since the last Diwali. There were 33 large cap funds in the said time period of which Samco Large Cap Fund lost the most of around 13.21%. ICICI Prudential Large Cap Fund, the largest large cap fund based on the assets managed, lost 11.39%.

Taurus Large Cap Fund gave the highest positive return of around 0.56% since the last Diwali celebrated on October 20, 2026.

ELSS funds and large & mid cap funds on an average lost 8.68% and 7.06% respectively in the said time period. Flexi cap funds delivered a negative average return of 6.79% since the last Diwali.

There were 42 flexi cap funds in the said time period, of which Samco Flexi Cap Fund lost the most of around 15.58% in the said time period. Sundaram Flexi Cap Fund delivered a negative return of 12.59% in the mentioned time period.

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Parag Parikh Flexi Cap Fund, the largest active fund and flexi cap fund based on assets managed, lost 6.69% in the said time period. ITI Flexi Cap Fund gained the most of around 1.78% since the last Diwali.

Value funds and focused funds on an average lost 6.50% and 6.18% respectively since October 20, 2025. Mid cap funds gave a negative average return of 4.65% since the last Diwali. There were 31 mid cap funds in the said time period of which Motilal Oswal Midcap Fund lost the most of around 10.33% in the said time period.

This was followed by PGIM India Midcap Fund that lost 9.01% in the same time period. ICICI Prudential Mid Cap Fund, the largest fund in the mid cap category based on assets managed, gave a negative return of 1.76% in the same time period. HSBC Midcap Fund gained the most of around 4.08% in the same time period.

Multi cap funds delivered a negative return of 4.33% in the mentioned period. There were nearly 32 multi cap funds of which HDFC Multi Cap Fund lost the most of around 11.03% and Groww Multicap Fund gained the most of around 5.18% in the said time period.

We considered all equity and equity oriented funds excluding sectoral, thematic, and equity oriented hybrid funds. We considered regular and growth options. We calculated the performance between October 20, 2025 to October 24, 2026.

Note, the above exercise is not a recommendation. The exercise was done to find how equity mutual fund categories have performed since last Diwali.

One should not make investment or redemption decisions based on the above exercise. One should always consider their risk appetite, investment horizon, and goals before making any investment decisions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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