HDFC Small Cap Fund is the only scheme with negative YTD returns in 2026: What sets it apart?

HDFC Small Cap Fund has delivered negative returns in 2026 so far, while Bank of India Small Cap Fund leads the category with 32.71% returns. Differences in small-cap allocation, sector exposure and stock selection offer insights into the contrasting performance of the two schemes.

Small-cap mutual funds are required to invest at least 65% of their assets in small-cap stocks. According to the latest available data from the Association of Mutual Funds in India (AMFI), there are 36 schemes in the category.

An analysis of their year-to-date (YTD) performance shows that HDFC Small Cap Fund is the only scheme to have delivered negative returns in 2026 so far, at -1.2%. In contrast, Bank of India Small Cap Fund has emerged as the top performer in this category, with YTD returns of 32.71% as of 14 October 2026.

The divergence extends to their one-year performance. HDFC Small Cap Fund is the only scheme in the category to have delivered negative returns over this period, at -2.48%. However, no fund in the category has posted negative returns over the three- and five-year periods.

The contrasting performance raises questions about the portfolio differences between the two schemes, including their market-cap allocation, sector exposure and stock selection.

How do the funds compare on portfolio allocation?

HDFC Small Cap Fund has allocated 90.07% of its portfolio to equities, with cash and cash equivalents accounting for the remaining 9.93%. Bank of India Small Cap Fund has a lower equity allocation of 85.67%, alongside 5.59% in debt and 8.74% in cash and cash equivalents.

Despite having a higher equity allocation, HDFC Small Cap Fund has lagged behind Bank of India Small Cap Fund. The difference becomes more apparent when their market-cap allocations are compared.

*Source: Value Research, Direct plans, Data as on 30 September 2026