HDFC Small Cap Fund is the only scheme with negative YTD returns in 2026: What sets it apart?
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.
| Market-cap category | HDFC Small Cap Fund | Bank of India Small Cap Fund |
| Large-cap | 7.21% | 2.24% |
| Mid-cap | 10.20% | 6.00% |
| Small-cap | 82.59% | 91.76% |
*Source: Value Research, Direct plans, Data as on 30 September 2026
Bank of India Small Cap Fund has a higher allocation to small-cap stocks at 91.76%, compared with 82.59% for HDFC Small Cap Fund. However, HDFC has greater exposure to large- and mid-cap stocks.
The difference suggests that Bank of India’s higher small-cap exposure may have contributed to its stronger performance, although returns also depend on individual stock selection, sector exposure, and the performance of underlying holdings. However, both small-cap funds hold 85 stocks in their portfolios.
Which sectors account for the largest share of their portfolios?
Both funds have their largest sector allocations in industrials and consumer discretionary stocks.
| No. | HDFC Small Cap Fund | Bank of India Small Cap Fund |
| 1 | Industrials — 22.07% | Industrials — 20.72% |
| 2 | Consumer Discretionary — 20.49% | Consumer Discretionary — 20.00% |
| 3 | Financials — 12.29% | Financials — 12.72% |
| 4 | Healthcare — 10.79% | Technology — 11.14% |
| 5 | Materials — 8.64% | Healthcare — 8.91% |
*Source: Value Research, Direct plans, Data as on 30 September 2026
The two funds have broadly similar exposure to industrials, consumer discretionary, and financials. However, Bank of India Small Cap Fund has a higher technology allocation, while HDFC Small Cap Fund has greater exposure to healthcare and materials.
How do their top stock holdings differ?
Stock selection provides another point of distinction. HDFC Small Cap Fund’s leading holdings include Firstsource Solutions, Aster DM Healthcare, Gabriel India, eClerx Services, and Bank of Baroda.
| No. | HDFC Small Cap Fund | Bank of India Small Cap Fund |
| 1 | Firstsource Solutions | Hero Motors |
| 2 | Aster DM Healthcare | Sky Gold and Diamonds |
| 3 | Gabriel India | City Union Bank |
| 4 | eClerx Services | Sterlite Technologies |
| 5 | Bank of Baroda | Quality Power Electrical Equipments |
| 6 | Krishna Institute of Medical Sciences | Raymond |
| 7 | Apar Industries | Optiemus Infracom |
| 8 | Indian Bank | Megasoft |
| 9 | Pearl Global | Anand Rathi Wealth |
| 10 | Eris Lifesciences | Wockhardt |
*Source: Value Research, Direct plans, Data as on 30 September 2026
The two funds have limited portfolio overlap, at 8%, with only 11 stocks in common.
This limited overlap highlights how differently the two fund managers have constructed their portfolios within the same small-cap category. Their sector allocations, market-cap exposure, and individual stock choices can lead to substantially different returns.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.
