Small-cap mutual funds remained the preferred category among equity-oriented schemes in September 2026, attracting the highest net inflows despite continued weakness in the broader stock market.
According to data from the Association of Mutual Funds in India (AMFI), small-cap schemes received Rs9,038.57 crore during September, compared with Rs7,973.33 crore in August.
The increase of approximately Rs1,065 crore represents monthly growth of 13.4%.
The category accounted for nearly 24% of total equity mutual fund inflows, highlighting sustained investment activity in smaller listed companies.
Small-Cap, Mid-Cap Funds Account For 44% Of Inflows
Equity-oriented mutual funds collectively attracted Rs38,306.55 crore in September, an increase of nearly 31% from Rs29,328.62 crore in the previous month.
Small-cap schemes led the category rankings, followed by mid-cap funds, which received Rs7,834.84 crore.
Flexi-cap funds occupied the third position with net investments of Rs6,701.80 crore.
Combined small-cap and mid-cap inflows reached Rs16,873.41 crore, representing approximately 44% of overall equity fund investments.
Small-cap mutual funds primarily invest in companies ranked beyond the 250 largest listed businesses by market capitalisation.
Although these companies may offer growth opportunities, their share prices can fluctuate considerably during uncertain market conditions.
The September figures indicate continued net investment in the category despite pressure on equity markets.
Strong inflows do not necessarily indicate that investors are increasing their exposure to riskier assets.
Net inflows represent investments remaining after redemptions and may rise because of increased purchases, fewer withdrawals or both.
AMFI's figures also do not establish whether investors are deliberately raising small-cap allocations or continuing existing systematic investment plans.
For existing investors, fund inflows and investment performance are separate considerations.
Higher investments in a category do not guarantee superior returns or indicate attractive stock valuations.
Small-cap schemes generally carry greater price volatility and liquidity risks than large-cap funds.
Their suitability depends on an investor's financial goals, investment horizon, risk tolerance and overall portfolio allocation.
September's data therefore highlights sustained demand without establishing whether small-cap valuations offer favourable investment opportunities.
