The domestic equity market has shown a strong recovery over the past month, with benchmark indices Sensex and Nifty rebounding 4.83% and 5.48%, respectively, after a prolonged sell-off that lasted for over five months. The past month’s recovery in the equity markets across market-cap categories is also reflected in the mutual fund space. All key mutual fund categories, particularly small-cap and mid-cap, have seen a significant revival in the last month. The small-cap mutual fund category has topped the chart with an average one-month return of 7.49%, followed by the mid-cap category’s average yield of 6.55%.
When the market started sliding in October 2024 through early March 2025, small-cap stocks were the most affected, with the BSE 250 SmallCap Index plunging over 24% from its peak. This decline was reflected in small-cap mutual funds as well. However, now that the market has regained some lost ground over the past month, small-cap funds are leading the recovery.
Over the past month, all 49 small-cap mutual funds have generated positive returns, ranging from 5.62% to 9.67%. However, the losses sustained over the previous five months, from October 2024 to February 2025, were so severe that the category’s three-month and six-month average returns remain in negative territory, at (-)19% and (-)22%, respectively.
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As we focus on the equity market’s recovery over the past month following the prolonged five-month sell-off, we will analyze the one-month performance of the top five small-cap mutual funds. Investors must note that a one-month period is too short for any investment evaluation, and the same applies to mutual funds. Therefore, no investment decision should be based solely on the returns generated by small-cap funds in this period. Investors should also consider returns over various time frames, along with other key parameters. Moreover, past returns should never be considered an indicator of future performance.
5 best small-cap mutual funds based on their 1-month returns 1. Bank of India Small Cap Fund
1-month return: 9.67%
Riskometer level: Very High
Assets: Rs 1,390 crore
Expense Ratio: 0.54%
2. TRUSTMF Small Cap Fund
1-month return: 9.24%
Riskometer level:
Assets: Rs 717 crore
Expense ratio: 0.51%
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