Small-Cap Funds: Bandhan vs Invesco vs Nippon India
Compare Bandhan, Invesco and Nippon India small-cap funds on cost, returns and risk, and see which one fits your goal before you invest.
## Small-Cap Fund Showdown: Bandhan vs Invesco vs Nippon India
A reader we will call Priya, a 34 year old software engineer in Pune, did something in September that a lot of salaried investors did this year. She moved ₹2 lakh out of a fixed deposit paying 6.5 percent and put it into a small-cap fund because her colleague's portfolio was up 40 percent. Two weeks later she messaged us asking a different question entirely: how has the best savings account become the boring option when a small-cap fund can double in three years and then fall 30 percent in six months?
That tension is the whole story. Small-cap funds in India now manage serious money, and the September 2026 inflow data made the pecking order clear. Bandhan Small Cap, Invesco India Smallcap, and Nippon India Small Cap are the three names that keep showing up at the top of the inflow tables, and they are not interchangeable. One suits a first-time small-cap investor. One suits someone with a 10 year horizon and a strong stomach. One is the giant that behaves a little differently precisely because it is a giant.
Here is how we would choose between them, with actual numbers.
## The three funds, and who each one is for
### Bandhan Small Cap Fund
Bandhan's small-cap fund has been the flow magnet of 2026, pulling in the most money among actively managed small-cap schemes in September. It runs a fairly concentrated portfolio and has leaned into mid and small caps in sectors like capital goods, financials, and consumer discretionary. Direct plan expense ratio sits around 0.55 percent to 0.70 percent. Regular plans cost roughly 1.5 percent to 1.8 percent.
Who it is for: an investor who already has a large-cap or index core and wants an aggressive satellite. Not for a first mutual fund.
### Invesco India Smallcap Fund
Invesco's offering is the middle child in this trio by size but not by ambition. It has historically kept a slightly more diversified book than Bandhan and has shown lower drawdowns in falling markets, though still firmly in small-cap territory. Direct plan expense ratio is around 0.5 percent to 0.65 percent.
Who it is for: someone who wants small-cap exposure without the most concentrated version of it. If you are nervous about a single fund manager's conviction bets, this is the calmer of the three.
### Nippon India Small Cap Fund
Nippon India Small Cap is the category's elephant. It has been one of the largest small-cap schemes in India for years, and size changes behavior. A fund managing tens of thousands of crores cannot move in and out of tiny companies the way a smaller fund can. It has also, historically, held a chunk of mid caps and even some larger names, which softens both the upside and the downside. Direct plan expense ratio is around 0.6 percent to 0.75 percent.
Who it is for: the investor who wants the most established track record in the category and accepts that the fund will behave a bit like a small-cap-plus fund rather than a pure one.
## What each one actually costs you
A buying decision without numbers is useless, so here is the comparison that decides it. Figures are indicative as of October 2026 and move with markets.
| Fund | Direct plan expense ratio | Indicative 3 year annualised return | Typical drawdown in a bad year | Minimum SIP | Best suited to |
|---|---|---|---|---|---|
| Bandhan Small Cap | 0.55% to 0.70% | High, with high volatility | Steepest of the three | ₹100 | Aggressive satellite investor |
| Invesco India Smallcap | 0.50% to 0.65% | Strong, slightly steadier | Moderate for the category | ₹500 | Cautious small-cap first timer |
| Nippon India Small Cap | 0.60% to 0.75% | Solid, softened by larger holdings | Least severe of the three | ₹100 | Long-horizon core-plus investor |
Three things to notice. First, the expense gap between direct and regular plans is 0.8 to 1 percentage point, which over 15 years is a genuinely large amount of money. Second, none of these funds is cheap in the way an index fund is. You are paying for active stock picking in the least efficient corner of the market, which is at least a defensible reason to pay. Third, the return differences that look dramatic over three years mostly vanish over ten, while the risk differences do not.
## The goal you are actually trying to reach
Small-cap funds are not a savings account replacement, and this is where Priya's original question comes back. If your goal is money you might need in three years, for a house down payment or a wedding, none of these three funds belongs in your portfolio. A small-cap fund can fall 30 to 40 percent and take two years to recover. That is not a flaw, it is the asset class.
If your goal is a 10 to 15 year corpus for retirement, and you already hold a stable core, then a small-cap allocation of 10 to 20 percent of your equity money is reasonable, and one of these three is a fine way to get it.
One tax point for our Indian readers, since we are a tax-aware publication. [Equity funds](/blog/top-mutual-funds-in-india) held over 12 months attract long-term capital gains tax at 12.5 percent on gains above ₹1.25 lakh in a financial year. Held under 12 months, gains are taxed at 20 percent. That 12 month line matters enormously here. Small-cap funds are volatile enough that a forced sale at month 11 can turn a paper gain into a real, heavily taxed loss.
## Our take
We would not split money across all three. Pick one, add via SIP, and leave it alone.
- If you are new to small caps and want the least jarring entry: Invesco India Smallcap Fund, direct plan, monthly SIP.
- If you already hold a large-cap index fund and want a punchier satellite: Bandhan Small Cap Fund, direct plan, and size the position so a 40 percent fall does not change your plans.
- If you want the most established name and can accept diluted small-cap purity: Nippon India Small Cap Fund, direct plan.
If you cannot honestly say you will leave the money untouched for at least seven years, our recommendation is none of these yet. Put it in a liquid fund or a short duration debt fund instead and revisit in a year. That is not a boring answer, it is the correct one for a short horizon.
And if you are reading this from London, Frankfurt, or New Jersey, note that these are India-domiciled funds. You can invest if you hold an NRI account and meet the rules for your country of residence, but the tax treatment and reporting get complicated fast. Talk to a cross-border tax advisor before you wire anything.
## FAQ
### Are small-cap funds safe for a three year goal?
No. Small-cap funds can fall 30 to 40 percent in a bad market and take years to recover. Use them only for goals at least seven to ten years away.
### Which of the three has the lowest cost?
Invesco India Smallcap Fund has the lowest direct plan expense ratio of the three, typically 0.50 percent to 0.65 percent. The gap versus a regular plan is far bigger than the gap between these funds.
### Should I invest in all three to diversify?
No. They hold overlapping stocks and all move with the same small-cap cycle. One fund plus a large-cap or index core gives you better diversification than three small-cap funds.
Frequently asked questions
Bandhan Small Cap Fund
Bandhan's small-cap fund has been the flow magnet of 2026, pulling in the most money among actively managed small-cap schemes in September. It runs a fairly concentrated portfo
No. Small-cap funds can fall 30 to 40 percent in a bad market and take years to recover. Use them only for goals at least seven to ten years away.
Which of the three has the lowest cost?
Invesco India Smallcap Fund has the lowest direct plan expense ratio of the three, typically 0.50 percent to 0.65 percent. The gap versus a regular plan is far bigger than the gap between these funds.
Should I invest in all three to diversify?
No. They hold overlapping stocks and all move with the same small-cap cycle. One fund plus a large-cap or index core gives you better diversification than three small-cap funds.
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