Small-cap mutual funds are once again in the spotlight this November, as investors weigh opportunities against rising market volatility and stretched valuations. Financial advisors caution that while the small-cap segment offers significant long-term potential, it comes with higher risks due to limited research coverage and sharp price swings.
Amid this backdrop, Helios Mutual Fund has announced the launch of the Helios India Small Cap Fund, an open-ended equity scheme that will predominantly invest in small-cap companies. The New Fund Offer (NFO) opened on November 6 and will close on November 20, 2025. The fund is benchmarked against the Nifty Small Cap 250 Total Return Index (TRI).
According to Helios, the new scheme is designed to capture India’s next phase of growth by focusing on emerging businesses linked to the country’s manufacturing, consumption, and capital expenditure (capex) cycles. The fund follows Helios’ research-driven, conviction-based approach, seeking high-quality businesses positioned for structural growth.
The minimum investment during the NFO period is ₹5,000, with subsequent purchases allowed in multiples of ₹1. The minimum additional purchase amount is ₹1,000.
Helios Mutual Fund said small-cap businesses often represent early-stage firms poised for innovation and expansion, with potential to become tomorrow’s large-cap leaders. The fund will seek opportunities in healthcare, chemicals, capital goods, and consumer services, sectors that are under-represented in large-cap indices but benefit from India’s evolving domestic demand and manufacturing ecosystem.
Dinshaw Irani, CEO and Managing Director of Helios India, said improving global liquidity and a stable macroeconomic backdrop support renewed investor interest. “Equity valuations have moderated and earnings expectations are stabilising, making small-cap investments more attractive on a relative basis,” he said.
Deviprasad Nair, Business Head at Helios India, added that small caps provide access to under-researched but high-growth companies at the intersection of domestic consumption, manufacturing expansion, and innovation. He highlighted India’s MSME base of 6.4 crore enterprises employing about 27 crore people, calling it a critical driver of long-term small-cap growth.
The fund’s launch coincides with expectations of stronger foreign portfolio inflows and increased retail participation as confidence in India’s economic fundamentals grows.
High risk, high reward
Despite short-term volatility, advisors say disciplined investors with a long-term horizon can benefit from small-cap exposure through systematic investment plans (SIPs) or staggered investments.
Over the past six months, small-cap funds have delivered an average return of 12.84%, supported by strong corporate earnings and renewed optimism in mid- and small-sized companies. However, on a one-year basis, the category has seen an average decline of 3.88%, reflecting intermittent corrections after a strong multi-year rally.
Looking longer term, small-cap funds have showcased impressive compounding potential:
3 years: +21.48% average annual return
5 years: +28.86% average annualised gain
10 years: +18.3% average annual return
Top performers in the category include TRUSTMF Small Cap Fund (21.81% in six months), Axis Small Cap Fund (20.21% over 10 years), and Nippon India Small Cap Fund (27.01% over 5 years).
Top small-cap mutual funds
TIMEFRAME: 6 MONTHS
1. TRUSTMF Small Cap Fund – Direct Plan – 21.81%
2. Mirae Asset Small Cap Fund – Direct Plan – 17.74%
3. HDFC Small Cap Fund – Direct Plan – 17.71%
4. Union Small Cap Fund – Direct Plan – 17.54%
TIMEFRAME: 1 YEAR
1. TRUSTMF Small Cap Fund – Direct Plan – 9.40%
2. Quantum Small Cap Fund – Direct Plan – 4.48%
3. Axis Small Cap Fund – Direct Plan – 1.57%
4. Aditya Birla Sun Life Small Cap Fund – Direct Plan – -3.25%
TIMEFRAME: 3 YEARS
1. Nippon India Small Cap Fund – Direct Plan – 25.48%
2. SBI Small Cap Fund – Direct Plan – 23.12%
3. Axis Small Cap Fund – Direct Plan – 20.30%
4. Aditya Birla Sun Life Small Cap Fund – Direct Plan – 19.39%
TIMEFRAME: 5 YEARS
1. Nippon India Small Cap Fund – Direct Plan – 27.01%
2. Axis Small Cap Fund – Direct Plan – 26.97%
3. SBI Small Cap Fund – Direct Plan – 25.12%
4. Aditya Birla Sun Life Small Cap Fund – Direct Plan – 24.16%
TIMEFRAME: 10 YEARS
1. Axis Small Cap Fund – Direct Plan – 20.21%
2. HDFC Small Cap Fund – Direct Plan – 19.83%
3. Nippon India Small Cap Fund – Direct Plan – 18.74%
4. Aditya Birla Sun Life Small Cap Fund – Direct Plan – 14.88%
Source: Value Research
What investors should know
Analysts say small-cap funds can be a powerful wealth-creation tool for those with high risk tolerance and patience. The category’s performance underscores its ability to outperform in recovery cycles, though short-term volatility remains inevitable.
As Helios joins the list of fund houses betting on India’s small-cap growth story, investors are reminded of one key principle — staying invested through market cycles is essential. In the long run, the segment continues to offer some of the best compounding opportunities in India’s equity landscape.
Disclaimer: Business Today provides market and personal news for informational purposes only and should not be construed as investment advice. All mutual fund investments are subject to market risks. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.