New Delhi, Sept. 22 -- Investors poured a record Rs.7,973 crore into small-cap mutual funds in August 2026, the highest monthly inflow into the category since the category-wise split was disclosed by the Association of Mutual Funds in India (Amfi) in April 2019.

Investor flows appear to be chasing the recent performance of small-caps. Between April and August 2026, the Nifty Smallcap 250 rose about 21%, against just 8% for the Nifty 50.

However, investors chasing small-caps purely on the basis of recent returns need to also understand the risks that come with them, especially heightened volatility.

Small-cap funds can potentially offer outperformance, but this is not straightforward. Their returns swing far more sharply than large-caps...