List of the Top Small Cap Index Funds in India 2026

As of 17 April 2026, the Nifty Smallcap 250 Index has delivered a 5-year return of 130.60%, while the Nifty Smallcap 50 Index has returned 105.05% over the same period. Several mutual funds aim to track these small-cap indices and replicate their performance. These are known as small cap index funds. Below is a list of the top small cap index funds in India, along with their key details, benefits, risks, and factors to consider before investing.

Top Small Cap Index Funds in India

Here is a list of the top small cap index funds based on their performance and key parameters.

Disclaimer: Please note that the above list of Small Cap Index Funds is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Mutual Fund Screener and is subject to real-time updates.

Note: The data on the list of small cap index funds is from 16th April 2026. This data is derived from the Tickertape Mutual Funds Screener.

• Plan: Growth
• Category: Index Fund – Small Cap (based on publibcly available data)
• AUM: Sorted from highest to lowest

Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

What are Small Cap Index Funds?

Small cap index funds are passively managed mutual funds that replicate the performance of a small cap stock market index. In India, most small cap index funds track the Nifty Smallcap 250 Index or the Nifty Smallcap 50 Index, which include companies ranked 251st to 500th by full market capitalisation on the NSE.

These funds invest in equity securities that constitute the index they track, maintaining proportional weights aligned with the benchmark. Unlike actively managed small cap funds, small cap index funds do not involve stock selection by a fund manager. They aim to deliver returns in line with the index, subject to tracking error.

Key characteristics of small cap index funds include:

• Exposure to companies ranked 251–500 by market capitalisation on the NSE
• Passive management with lower expense ratios compared to active small cap funds
• Portfolio rebalanced periodically as per index reconstitution
• Higher return potential over the long term, accompanied by higher volatility
• Broad diversification across multiple sectors and small cap companies

Overview of Top Small Cap Index Funds

• Nippon India Nifty Smallcap 250 Index Fund: Nippon India Nifty Smallcap 250 Index Fund is a passive fund that tracks the Nifty Smallcap 250 Index. It invests across all 250 index stocks based on their weight and gives broad exposure to India’s small-cap segment through a diversified, index-based approach.
• SBI Nifty Smallcap 250 Index Fund: SBI Nifty Smallcap 250 Index Fund tracks the Nifty Smallcap 250 Index by investing in its constituent stocks in the same proportion. It offers low-cost access to a diversified basket of small-cap companies and is designed to closely mirror the benchmark’s performance.
• Motilal Oswal Nifty Smallcap 250 Index Fund: Motilal Oswal Nifty Smallcap 250 Index Fund is a passive scheme that replicates the Nifty Smallcap 250 Index. The fund invests in all index constituents and aims to deliver benchmark-like returns while keeping tracking error and costs relatively low.
• ICICI Pru Nifty Smallcap 250 Index Fund: ICICI Pru Nifty Smallcap 250 Index Fund tracks the Nifty Smallcap 250 Index and invests in the companies that form part of it. It gives investors diversified exposure to the small-cap segment through a passive route designed to follow index performance.
• HDFC NIFTY Smallcap 250 Index Fund: HDFC NIFTY Smallcap 250 Index Fund seeks to replicate the Nifty Smallcap 250 Index by investing in its constituent stocks as per their weight. It offers broad exposure to India’s small-cap space through a simple and diversified passive investment structure.
• Axis Nifty Smallcap 50 Index Fund: Axis Nifty Smallcap 50 Index Fund tracks the Nifty Smallcap 50 Index, which includes 50 more liquid small-cap stocks. Compared to broader small-cap indices, it offers a more focused portfolio and targeted exposure to relatively more tradeable small-cap companies.
• JioBlackRock Nifty Smallcap 250 Index Fund: JioBlackRock Nifty Smallcap 250 Index Fund is a passive fund that tracks the Nifty Smallcap 250 Index. It invests in the index constituents to replicate benchmark performance and offers diversified small-cap exposure through an index-based investment approach.
• DSP Nifty Smallcap250 Quality 50 Index Fund: DSP Nifty Smallcap250 Quality 50 Index Fund tracks the Nifty Smallcap250 Quality 50 Index. Instead of covering the full small-cap universe, it focuses on 50 stocks selected using quality factors such as return ratios, debt levels, and earnings consistency.
• Aditya Birla SL Nifty Smallcap 50 Index Fund: Aditya Birla SL Nifty Smallcap 50 Index Fund tracks the Nifty Smallcap 50 Index and invests in 50 liquid small-cap stocks. It offers a more concentrated small-cap portfolio for investors looking at index-based exposure within a narrower universe.
• Edelweiss Nifty Smallcap 250 Index Fund: Edelweiss Nifty Smallcap 250 Index Fund tracks the Nifty Smallcap 250 Index by investing in all its constituent stocks in the same weight. It provides broad-based exposure to India’s small-cap segment through a diversified and passive investment strategy.

Taxation on Small Cap Index Funds

Small cap index funds are classified as equity mutual funds since they invest predominantly in equities. The taxation on small cap index funds is as follows:

Note: Long-term capital gains up to ₹1.25 lakh in a financial year are exempt from tax. Gains exceeding this threshold are taxed at 12.5% without the benefit of indexation.

How to Invest in Small Cap Index Funds?

You can start investing in small cap index funds by following these steps:

• To invest in small cap index funds, you can visit an equity investment platform such as smallcase
• The next step is to research and identify the small cap index fund that aligns with your investment objective and risk appetite. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as tracking error, expense ratio, and fund size.
• Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or a SIP plan, and complete the process.

Who Should Invest in Small Cap Index Funds?

• Investors with a Long Investment Horizon: Small cap stocks can experience significant short-term volatility. Investors with a minimum investment horizon of seven years or more may be better positioned to ride out market cycles and benefit from the long-term compounding potential of small cap equities.
• Investors Seeking Diversified Small Cap Exposure: Small cap index funds invest across 50 to 250 companies depending on the index tracked, providing broad sector and stock diversification within the small cap segment. This reduces concentration risk compared to holding a small number of individual small cap stocks.
• Investors Who Prefer Passive Management: For investors who prefer index-based investing over active fund management, small cap index funds offer a rules-based, transparent approach with lower expense ratios. The portfolio composition mirrors the index without relying on fund manager discretion.
• Investors Adding Satellite Allocation: Small cap index funds are often used as a satellite allocation within a broader equity portfolio that includes large cap or flexi cap funds as the core. This allows investors to participate in small cap growth while managing overall portfolio risk.

Benefits of Investing in Small Cap Index Funds

• Long-Term Growth Potential: Small cap companies are at an earlier stage of their growth cycle compared to large cap peers. Historically, small cap indices have generated higher returns than large cap indices over long investment horizons, though with greater volatility in the interim.
• Broad Diversification at Low Cost: Funds tracking the Nifty Smallcap 250 provide exposure to 250 companies across multiple sectors in a single scheme. This level of diversification is difficult to replicate through direct stock investing, and the passive structure keeps expense ratios lower than actively managed small cap funds.
• Transparent Portfolio Composition: Since small cap index funds mirror a publicly available index, investors can track the exact constituents and their weights at any time. This transparency makes it easier to understand portfolio exposure and evaluate alignment with personal investment goals.
• Eliminates Active Management Risk: Active small cap fund managers face challenges in consistently identifying outperforming stocks within a large and less researched universe. Index funds remove the risk of poor stock selection or high portfolio churn by systematically replicating the benchmark.
• Participation in India’s Economic Growth Story: Small cap companies are often closely tied to domestic economic activity, manufacturing, and consumption. As India’s economy grows and new industries emerge, small cap companies can be early beneficiaries of structural economic shifts, credit growth, and rising consumer demand.

Risks of Investing in Small Cap Index Funds

• Higher Volatility: Small cap stocks are more sensitive to market sentiment, economic slowdowns, and liquidity shifts than large cap stocks. During broad market corrections, small cap indices can fall more sharply and recover more slowly than large cap benchmarks.
• Concentration in Certain Sectors: Depending on the index composition at any point in time, small cap indices may have higher weightage in specific sectors such as industrials, chemicals, or consumer goods. Sector-level underperformance can have a meaningful impact on overall fund returns.
• No Downside Protection: Unlike active fund managers who can reduce exposure to weaker stocks, index funds must hold all constituents regardless of individual company fundamentals. Weak or deteriorating companies remain in the portfolio until they are removed during the next index reconstitution.
• Longer Recovery Periods: Small cap indices may take significantly longer to recover from sharp drawdowns compared to large cap indices. Investors who cannot remain invested through extended drawdown periods may exit at a loss before recovery occurs.

Factors to Consider Before Investing in Small Cap Index Funds

• Index Tracked: Most small cap index funds in India track either the Nifty Smallcap 250 or the Nifty Smallcap 50. The Nifty Smallcap 250 offers broader diversification across 250 companies, while the Nifty Smallcap 50 focuses on the 50 most liquid small cap stocks. Some funds track quality-filtered variants such as the Nifty Smallcap250 Quality 50 Index. Investors should review which index the fund tracks and whether its composition aligns with their investment objective.
• Tracking Error: Tracking error is particularly important for small cap index funds given the liquidity constraints of the underlying stocks. Funds with lower tracking error indicate more accurate replication of the benchmark. Comparing tracking error across funds tracking the same index helps identify more consistent replicators.
• Expense Ratio: Since these are passively managed funds, expense ratios should be low. Even small differences in expense ratios compound over time and can impact long-term net returns. Investors should compare expense ratios across funds tracking the same index before making a selection.
• Investment Horizon: Small cap investing requires patience. Investors should ideally have a minimum investment horizon of five to seven years to allow the portfolio to recover from drawdowns and benefit from the long-term compounding potential of small cap equities.
• Role in Overall Portfolio Allocation: Small cap index funds are generally more suitable as a satellite allocation rather than a core holding. Investors should assess how much of their equity portfolio they allocate to small cap exposure based on their overall risk tolerance and financial goals.

To Wrap It Up…

Small cap index funds offer a transparent, low-cost, and diversified route to participating in India’s small cap equity segment. They eliminate active management risk and provide systematic exposure to companies ranked 251–500 by market capitalisation, which have historically demonstrated higher long-term growth potential.

However, small cap index funds carry higher volatility, liquidity risk, and longer recovery cycles compared to large cap funds. Before investing, review the index tracked, tracking error, expense ratio, fund AUM, and your own investment horizon and risk tolerance.

To analyse small cap index funds in detail, use the Tickertape Mutual Fund Screener, which provides 50+ filters. You can compare funds based on returns, risk metrics, expense ratio, tracking error, portfolio allocation, and consistency using pre-built filters for structured evaluation.

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Frequently Asked Questions on Small Cap Index Funds in India