8 months ago
Small-Cap Funds Limit Microcap Exposure to 2%
Small-cap funds in India mostly invest in larger small-cap stocks, with only about 2% going to the smallest companies, called microcaps.
These funds have around ₹3.7 lakh crore invested across 32 schemes.
Most of the money is put into the top 750 stocks, with a big focus on the core small-cap segment.
Some money is also kept in larger companies, cash, and debt for safety.
Small-cap stocks have grown a lot in the past five years, especially those ranked lower.
Investors are putting more money into small-cap funds even when they lose value in the short term, showing they believe in long-term growth.
Some well-known companies are actually small-caps, even though people might think they are bigger.
This shows that small-cap funds are important for accessing unique sectors and creating long-term value.
Small-cap funds in India allocate only ~2% to microcaps (stocks ranked beyond 1000 by market cap).
Approximately 83% of small-cap fund portfolios are invested in the top 750 stocks, with the core small-cap segment (ranked 251-750) accounting for ~63%.
Small-cap market capitalization has significantly increased over the past five years, with the 750th ranked stock growing ~7.3x from June 2020 to June 2025.
Investors continued to allocate funds to small-cap schemes despite negative returns of ~2.4% between December 2024 and November 2025, indicating long-term conviction.
Some well-known companies like CDSL, Gillette, and Tata Chemicals are officially classified as small-caps, though investors often perceive them as mid-caps.
- Who
- Small-cap fund managers and investors
- What
- Limited exposure to microcaps and significant allocation to core small-cap stocks
- Where
- India
- When
- As of November 2025
- Why
- To manage risk and maintain liquidity while accessing niche sectors
Key facts
- Total AUM
- ₹3.7 lakh crore
- Number of Schemes
- 32
- Top 750 Stocks Allocation
- 83%
- Core Small-Cap Allocation
- 63%
- Stocks Ranked 751–1000 Allocation
- 7%
- Large and Mid-Cap Allocation
- 20%
- Cash and Debt Allocation
- 6%
- Net Inflows (Dec 2024 - Nov 2025)
- ₹53,165 crore
- Small-Cap Returns (Dec 2024 - Nov 2025)
- -2.4%
Quotes
Juzer Gabajiwala
Director at Ventura
“By nature, smallcaps are volatile and at times risky. However, the category has evolved, portfolio construction has become more disciplined, and the opportunity set continues to broaden. Patience is the key for any portfolio investing and to create 'alpha' one must have smallcaps in the portfolio.”
thehansindia.com
“Many stocks perceived as large- and mid-cap are actually small-cap stocks for fund managers as per AMFI classification.”
thehansindia.com




