Small cap mutual funds that invest in the stocks of very small companies have given among the worst performers in 2025 with a negative average return of 5%. In May 2026, the small cap funds again gained investors' interest and received an inflow of Rs 4,945 crore.
The talk about the higher valuations in the small cap space and the recent volatility in the market are forcing many investors to accept that a correction may be around the corner. Mutual fund managers and advisors say the valuations are rich but investors can continue to invest in small cap schemes to create wealth over a long period. According to many mutual fund advisors, even though the small cap segment has run up a lot in the last six months, investors can still invest in these schemes in a staggered manner to create wealth over a long period.
