Bandhan Small Cap Fund v/s Tata Small Cap Fund: Which is Better for Your Watchlist?

May 27, 2025

Over the past few years, small-cap stocks have outperformed and exceeded all expectations. In 2024, small cap mutual funds were the top-performing sub-category among equity mutual funds with average returns of 27%.

But keep in mind that small cap funds are high-risk high-return investment propositions. This is because at least 65% of their assets are invested in small-cap stocks. These are companies ranking below 250 in terms of market capitalisation.

In this editorial, we will compare two top small cap mutual funds: Bandhan Small Cap Fund and Tata Small Cap Fund.

These funds are among the popular ones and are similar in terms of their size of Assets Under Management (AUM).

However, both these schemes follow distinctive investment approaches or strategies for stock picking.

Bandhan Small Cap Fund v/s Tata Small Cap Fund

Bandhan Small Cap Fund is an open-ended equity scheme launched in launched in February 2020, amid the market low seen during the COVID-19 pandemic. It has assets under management (AUM) of Rs 102.44 billion (bn) as per its April 2025 portfolio.

On the other hand, Tata Small Cap Fund was launched 6.5 years ago, in November 2008, during the market low of the previous big bear market. It has an AUM of Rs 94.18 bn as of April 2025.

Both these schemes focus on investing in smallcap companies.

However, these funds follow a distinctive approach to stock picking.

Bandhan Small Cap Fund follows a growth style of investing. It focuses on prime focus on quality, growth, and valuations when investing in smallcaps.

The fund holds a well-diversified portfolio of 184 stocks out of which 72% is held in smallcaps, 10% in midcaps, and around 6% in largecaps. At present around 12% is held in cash and cash equivalents.

Bandhan Small Cap Fund follows a buy-and-hold strategy, but at times hasn’t resisted churning its portfolio to achieve its investment of long-term capital appreciation.

Now let’s move on to the fund we will compare it with…

Tata Small Cap Fund’s approach is identifying growth-oriented sound stocks available at reasonable valuations.

In other words, it follows a ‘growth at a reasonable price’ (GARP) approach for stock picking.

A ‘bottom-up’ strategy is used to assess the valuations and fundamentals of the stocks.

The focus of Tata Small Cap Fund is on investing in companies that can grow in terms of profitability and cash flows with strong balance sheets i.e., low debt and high cash flows.

These businesses can surprise the markets over time in terms of earnings, which in turn, can lead to a positive change in the valuations.

Tata Small Cap Fund aims to maintain a well-diversified portfolio of small-cap stocks with a medium to long-term view to derive their full potential gains.

As of April 2025, it has 61 stocks in the portfolio, nearly 83% of which is invested in small-cap stocks and 8% is in midcaps.

The fund currently does not have any exposure to largecaps. The balance is held in debt and cash & cash equivalents.

By and large, Tata Small Cap Fund avoids chasing momentum and focuses on investing with a long-term view. Accordingly, it has had a low portfolio churn of less than 20% in the last one year.

Here are the top 10 stock holdings of two schemes, as per the April 2025 portfolio:

Top Portfolio Holdings

Table 1: Bandhan Small Cap Fund

Source: ACE MF

Table 2: Tata Small Cap Fund

Source: ACE MF

These schemes have different stocks in their top 10 holdings.

Bandhan Small Cap Fund’s top 10 holdings have exposure to sectors such as real estate, consumer staples, banks and non-banking finance companies, chemicals, textiles, and healthcare among others.

On the other hand, Tata Small Cap Fund has exposure sectors such as chemicals, capital goods, materials, banks, auto ancillaries, technology, hospitality, etc.

Performance of Bandhan Small Cap Fund and Tata Small Cap Fund

As seen in the table below, both these schemes have shown an appealing performance track record across longer periods.

They have outperformed the benchmark Nifty Smallcap 250 – TRI and the category average.

Over the last 5 years, Bandhan Small Cap Fund has clocked a stellar compounded annualised growth rate (CAGR) of 37.3%, whereas Tata Small Cap Fund’s CAGR is 34.2% (as of 23 May 2025).

Table 3: Fund Report Card Vis-a-vis Its Category Peers and Benchmark Index

Scheme Name	Absolute (%)		CAGR (%)			Risk Ratios			AUM (Rs in Cr.)	Expens Ratio %
	6 Months	1 Year	2 Years	3 Years	5 Years	SD Annua-lised	Sharpe	Sort-ino
Bandhan Small Cap Fund	14.49	49.75	46.65	28.60	37.34	17.92	0.41	0.81	10,244	0.39
Tata Small Cap Fund	10.14	32.86	34.15	26.28	34.24	16.29	0.35	0.62	9,418	0.37
Category Average*	7.02	28.89	32.13	23.23	30.40	17.64	0.28	0.52	–
Benchmark Indices
Nifty Smallcap 250 – TRI	6.4	32.23	36.3	22.82	30.84	19.44	0.27	0.5	–
Nifty 50 – TRI	5.1	18.46	18.44	13.59	18.02	12.57	0.26	0.59	–

*All schemes within the category considered.

Source: ACE MF

Bandhan Small Cap Fund, in particular, has fared well across bull and bear market phases, outperforming their benchmark index and category peers.

What’s important is that both these schemes while generating returns have been able to keep their risk in check as reflected by the annualised standard deviation.

Overall, with good underlying portfolios, these small cap mutual funds have compensated their investors well on a risk-adjusted returns basis.

Rs 10,000 invested five years ago in Bandhan Small Cap Fund would have yielded Rs 53,894 whereas in Tata Small Cap Fund, Rs 51,703, as of 23 May 2025.

At present, Bandhan Small Cap Fund is managed by Kirthi Jain since June 2023 along with Manish Gunwani since January 2023. Before that, this scheme was managed by Anoop Bhasker and Harsh Bhatia.

Tata Small Cap Fund has been managed by Chandraprakash Padiyar since November 2018 along with Jeetendra Khatri since October 2023.

The expense ratio under the direct plan of Bandhan Small Cap Fund is currently 0.39%, while that of Tata Small Cap Fund is 0.37%.

Conclusion

Both Bandhan Small Cap Fund and Tata Small Cap Fund are schemes from fund houses following robust investment processes and systems.

Their focus has been on holding worthy underlying portfolios and risk management in their endeavour to achieve their investment objectives.

A word of caution…

Currently, the BSE Smallcap-to-Sensex ratio – which is a key determinant of valuations in the small-cap segment – is at 0.63, This is higher than the long-term average of 0.46.

So, you need to be cautious of when small cap mutual funds.

While they have the potential to generate high returns, it is also important to keep a longer horizon of 7-8 years or more in small cap funds and have a high-risk tolerance.

Happy Investing.

# Table 3 Note: Data as of 23 May 2025
Rolling period returns are calculated using the Direct Plan-Growth option. Returns over 1-year are compounded annualised.
Standard Deviation indicates Total Risk and Sharpe Ratio measures the Risk-Adjusted Return. They are calculated over 3 years assuming a risk-free rate of 6% p.a.
*All small cap mutual fund schemes considered to compute the category average returns.
Please note, that this table represents past performance.
Speak to your investment advisor for further assistance before investing.

Disclaimer: Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendatory.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.
This article is for information purposes only. It is not a recommendation and should not be treated as such.