Small-cap stocks have witnessed increased volatility in recent months, with the Nifty Smallcap 250 Index delivering mixed performance across different time periods.
The index generated a return of 0.28% over the last one year, while declining 2.06% in the last six months and 4.42% over the last three months.
Nifty Smallcap 250 Index
| Period | Nifty Small cap 250 Index Performance |
| 1 Year | 0.28% |
| 6 Months | -2.06% |
| 3 Months | -4.42% |
Source: NSE
This reflects the broader pressure and fluctuations currently visible in the small-cap segment.
Despite this volatility, small-cap mutual funds continue to remain in focus among investors looking for long-term growth opportunities.
In this editorial, we are going to talk about the Bandhan Small Cap Fund, including its portfolio positioning, sector allocation, top holdings, historical performance, and key risk metrics to understand how the fund has performed in the current market environment.
Bandhan Small Cap Fund Key Details 2026
Bandhan Small Cap Fund (formerly known as Bandhan Emerging Businesses Fund) is an open-ended equity scheme that primarily invests in small-cap stocks.
As of 31 March 2026, the fund’s Assets Under Management (AUM) stood at Rs 201.3 billion (bn), with a monthly average AUM of Rs 202.9 bn.
The fund’s risk and return indicators suggest relatively stable performance compared to the broader market. The fund has a beta of 0.92, indicating slightly lower volatility than the market, while the Sharpe ratio of 0.99 reflects its risk-adjusted return performance.
Additionally, the fund’s annualised standard deviation stood at 19.22%, and its R-Squared of 0.95 indicates a high correlation with its benchmark.
Bandhan Small Cap Fund Portfolio Strategy
The fund follows a 3-pronged stock selection approach focusing on Quality, Growth, and Reasonable Valuation. The investment strategy is built around constructing a diversified portfolio within the small-cap segment to capture the growth potential of emerging businesses.
In terms of portfolio positioning, the fund is heavily biased towards small-cap stocks, which constitute 67.01% of the portfolio.
It also holds 15.67% in mid-cap stocks and 4.63% in large-cap stocks, with the remaining 12.69% held in cash and cash equivalents to manage liquidity and opportunistic entries.
Which Sectors Does Bandhan Small Cap Fund Invest in?
If we look at the sector wise distribution…
Top 5 Sector Allocation
| Sector Name | Weight in Fund (%) |
| Financial Services | 27.60% |
| Healthcare | 11.40% |
| Capital Goods | 10.20% |
| Realty | 7.80% |
| Chemicals | 5.20% |
Source: Funds Factsheet
In terms of sector allocation, the fund has the highest exposure towards Financial Services, which accounts for 27.6% of the portfolio. This is followed by healthcare at 11.4% and Capital Goods at 10.2%, indicating the fund’s focus on sectors linked to domestic growth and economic activity.
The portfolio also has exposure to realty and chemicals, which account for 7.8% and 5.2%, respectively.
And in terms of stocks holdings, the fund portfolio is diversified with a portfolio turnover ratio is 0.22 (both for equity and aggregate) suggesting a long-term investment approach.
Top 5 Stock Holdings
| Company/Instrument | Industry | % of NAV |
| REC | Finance | 3.57% |
| Sobha | Realty | 3.25% |
| LT Foods | Agricultural Food & other Products | 2.27% |
| The South Indian Bank | Banks | 1.82% |
| Arvind | Textiles & Apparels | 1.65% |
Source: Funds Factsheet
Among individual holdings, REC is the largest position with a 3.57% allocation, followed by Sobha at 3.25% and LT Foods at 2.27%. Other key holdings include The South Indian Bank and Arvind.
Bandhan Small Cap Fund Returns Compared to Benchmark
In terms of historical performance, the fund has outperformed its benchmark across most time periods.
Bandhan Small Cap Fund vs Benchmark
| Period | Scheme CAGR (%) | Scheme Value (₹) | Benchmark CAGR (%) | Benchmark Value (₹) |
| 1 Year | -0.22% | 9,978 | -5.83% | 9,414 |
| 3 Years | 26.09% | 20,048 | 16.36% | 15,754 |
| 5 Years | 20.21% | 25,101 | 15.43% | 20,492 |
| Since Inception (Feb 25, 2020) | 25.82% | 40,564 | 18.67% | 28,388 |
Source: Funds Factsheet
Over the last one year, the scheme delivered a return of -0.22%, compared to the benchmark’s decline of -5.83%, indicating relatively better downside protection.
Over the longer term, the fund has generated stronger returns than its benchmark. It delivered a CAGR of 26.09% over the last 3 years, significantly higher than the benchmark return of 16.36%.
Similarly, over the 5-year period, the fund generated a CAGR of 20.21% vs 15.43% for the benchmark.
Since inception in February 2020, a Rs 10,000 investment in the fund would have grown to Rs 40,564, compared to Rs 28,388 in the benchmark index.
Who Should Consider Bandhan Small Cap Fund?
Overall, Bandhan Small Cap Fund has delivered strong long-term performance compared to its benchmark, supported by its diversified portfolio and focus on emerging small-cap businesses.
The fund has also maintained significant exposure towards sectors such as Financial Services, Healthcare, and Capital Goods, reflecting its growth-oriented position.
However, as a small-cap fund, it carries relatively higher volatility and market risk compared to large-cap-oriented schemes.
Therefore, investors should carefully evaluate their risk appetite, investment horizon, and financial objectives before investing.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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