InvestmentFinancial Glossary
Small Cap
Definition
Companies ranked 251st and below by market capitalization on Indian stock exchanges, as classified by SEBI. Small-cap companies are typically younger, faster-growing businesses with higher volatility. Small-cap funds must invest at least 65% of their corpus in small-cap stocks.
Why It Matters
Small-cap funds have delivered the highest returns over 10+ year periods among all equity fund categories in India, averaging 15-18% CAGR. However, they can drop 50-60% in bear markets and take 2-3 years to recover. Only invest with a 7-10 year minimum horizon and limit small-cap allocation to 15-20% of your equity portfolio.