Small-cap mutual funds witnessed a challenging September 2026, as the broader category recorded a 2.59% decline. Despite this widespread pressure, a select few schemes managed to defy the trend and post positive returns for the month, according to data from Value Research.
Only Four Funds See Gains Amidst Sell-Off
Out of numerous small-cap funds, only four successfully delivered positive returns in September. Topping the list was Samco Small Cap Fund, which remarkably posted a 6.20% gain. It was followed by Bank of India Small Cap Fund at 1.12%, Tata Small Cap Fund at 0.77%, and Groww Small Cap Fund with a modest 0.20% return.
The vast majority of funds, however, reported losses. Notable declines included Edelweiss Small Cap Fund, which saw the steepest fall at 5.03%, and UTI Small Cap Fund, which dropped 4.22%. Other significant negative performers included SBI Small Cap Fund (-3.79%) and Canara Robeco Small Cap Fund (-3.89%).
Broader Market and One-Year Outlook
The downturn was not limited to actively managed funds. The small-cap index itself declined by 3.12% in September, indicating a broader market correction impacting smaller companies.
Despite the monthly weakness, the long-term picture for small-cap funds remained robust. The category maintained a strong 9.92% return over the one-year period ending September 2026. The small-cap index also showed a positive, albeit more modest, one-year return of 2.92%.
Top One-Year Performers
- Bank of India Small Cap Fund: 29.25%
- TRUST MF Small Cap Fund: 29.14%
- Motilal Oswal Small Cap Fund: 20.88%
- Union Small Cap Fund: 20.55%
Conversely, HDFC Small Cap Fund and Tata Small Cap Fund were among the few funds to record negative one-year returns, at -2.94% and -0.28% respectively. This highlights the varied performance within the small-cap segment, where individual fund strategies can lead to significant divergence from the category average.
“The September numbers highlight the volatility within the small-cap segment, where individual fund performance varied sharply even as the broader category came under pressure. The data also shows that a weak monthly performance did not necessarily erase gains accumulated over the preceding year,” notes the Value Research data.
Investors are advised to consider both short-term fluctuations and long-term trends when evaluating small-cap fund performance, and to consult with a financial advisor before making investment decisions.