As of November 2025, the small-cap fund category manages Rs3.7 lakh crore across 32 schemes
FinTech BizNews Service
Mumbai, 14 January 2026: According to a study by Ventura, portfolio exposure of small cap funds beyond the market cap rank of 1000—or microcaps—remains limited to 2%. As of November 2025, the small-cap fund category manages Rs3.7 lakh crore across 32 schemes. The analysis shows that approximately 83% of small-cap fund portfolios are invested within the top 750 stocks, with the core small-cap segment—comprising stocks ranking 251-750 by market cap—accounting for 63%. Allocation to stocks ranked 751–1000 stands at 7%, about 20% is allocated to large and mid-caps, and about 6% is held in cash and debt for liquidity purposes.
Interestingly, small-cap market capitalization has expanded sharply in the past five years. Companies in the lower deciles of the listed universe have especially exhibited the fastest compounding in median market capitalization. For instance, between June 2020 to June 2025, the 251st rank has increased in market capitalization by~4.4x, the 500th by ~6.1x, and 750th by ~7.3x.
AMFI Rank | Market Capitalization (in ₹ crore, Jun-2025) | Market Capitalization (in ₹ crore, Jun-2020) |
251 | 30,627 | 6,936 |
500 | 10,299 | 1,695 |
750 | 4,873 | 666 |
Access to niche sectors
The study highlights that sectors in India, such as abrasives, business services, and media & entertainment are largely unavailable through large- or mid-cap stocks. For example, Computer Age Management Services Ltd. and Central Depository Services (India) Ltd. sit within business services, while PVR Inox and Sun TV Network Ltd. represent media & entertainment.
Perception problem
Allocation to small-caps is also skewed by perception. “Many stocks perceived as large- and mid-cap are actually small-cap stocks for fund managers as per AMFI classification,” says Juzer Gabajiwala, Director at Ventura. For example, familiar companies—including CDSL, Gillette, NBCC, PNB Housing Finance, Wockhardt, East India Hotels, Angel One, and Tata Chemicals—are officially classified as small caps even though investors often think of them as mid-cap–like.
Shift in investor behavior
As per the study, investor behaviour does not always follow short-term performance. Between December 2024 and November 2025, small-cap funds delivered negative returns of roughly –2.4 percent, yet the category saw net inflows of ₹53,165 crore. Instead of pulling back, investors continued to allocate more. This suggests that flows are being driven by long-term conviction rather than short-term price movements. “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,” Gabajiwala concludes.
