Despite the sell-off environment in the first six months of 2026, small-cap mutual funds made investors wealthy by giving excellent returns of up to 21.9%.
The first six months of 2026 were quite challenging for the Indian stock market. During this period, several negative factors such as the US-Iran war, rising crude oil prices, and continuous selling by foreign investors (FIIs) dominated.
But even in this difficult environment, small-cap mutual funds emerged as a ray of hope for investors and delivered excellent returns.
In the first half of the year, almost every investment-related sector saw a decline in returns. Major reasons behind this included the US-Iran war, the impact of Artificial Intelligence (AI) on jobs, and the falling rupee.
Despite all these challenges, small-cap mutual funds performed the best. They were followed by mid-cap and multi-cap funds. Meanwhile, due to heavy selling by foreign investors in large-cap stocks, most large-cap funds gave negative returns.
During this period, many small-cap funds beat their benchmarks by a large margin. Let's get to know the top performers.
Bank of India Small Cap Fund surprised everyone by delivering a tremendous return of 21.9% in the first half of 2026. Launched in December 2018, this fund has invested 80.9% of its total assets in small-cap stocks.
Additionally, 13.1% is invested in mid-cap and only 1.5% in large-cap stocks. The fund's key investments include Wockhardt, Sky Gold & Diamonds, Acutas Chemicals, Lloyds Metals & Energy, and Quality Power Electrical Equipments.
A benchmark return is the standard against which the performance of a mutual fund is compared. For all these funds, the Nifty Smallcap 250-TRI is considered the benchmark.
Interestingly, this benchmark gave a return of only 6.9% in six months. In comparison, the Bank of India Small Cap Fund delivered 15% more return, securing the top spot in its category.
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