The Case for Smallcaps: A Window on India’s Entrepreneurial Surge

The Case for Smallcaps: A Window on India’s Entrepreneurial Surge

India is brimming with entrepreneurial energy. Businesses across the country are innovating, scaling new heights and entering untapped markets. Many of the best success stories come from new faces – the small, growing businesses that form the vibrant small-cap segment. For investors, the question is not just whether to participate in this small-cap surge, but how to do so thoughtfully. That’s where a Nifty small-cap 250 Index Fund comes in – one simple investment that offers broad, diversified exposure to 250 of India’s emerging businesses.
Published on August 08, 2025
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How the smallcap index is built [1][2]

The smallcap index tracks the performance of India’s emerging and growing businesses in a structured and disciplined way. Here’s how it works:

Where do the stocks come from?

  • Specifically, it takes the companies ranked 251 to 500 (based on free float market capitalisation.
  • It intends to measure the performance of small market capitalisation companies.

What’s the aim of this fund?

  • Designed to capture small-cap performance, it also offers diversified exposure across sectors.

Rebalancing

  • The fund is rebalanced semi-annually in March and September
  • This keeps the index aligned with India’s small-cap sector as it evolves.

The small-cap potential

Small-cap companies often operate in growing or under-served markets. Their ability to be flexible and adopt new technologies means they may grow faster than their larger peers.

Because they’re still building scale, the upside potential may be significant over the long term.

Pro tip: Be prepared for market ups and downs. Staying invested through economic cycles is key to benefiting from the full potential of these companies. Most attractive to patient investors with a high-risk tolerance and long horizon.

A window to India’s diverse opportunities

One of the key strengths of a small-cap index fund is its variety. The 250 companies span a broad mix of sectors. Investing in a small-cap index fund means you have a stake in many at the same time. This could increase the chances of benefiting from winning trends.

A long-term lens

Small-cap companies are often still in their early stages. While some may grow larger over time, others remain niche players.

A small-cap index fund enables you to participate in potential emerging businesses with significate room for growth without needing to predict who will succeed.

Why now?

The foundation of India’s economy is shifting. By investing through a small-cap index fund, you can ride this wave of entrepreneurship without having to pick and monitor individual stocks.

Pro tip: Start early and invest consistently. Even modest investments in a small-cap index fund can potentially grow meaning over time when you stay the course.

The takeaway

The entrepreneurial spirit of India is well reflected in its small-cap segment. Here, new ideas, thoughtful strategies and measured growth are shaping the future market leadership.

For investors looking to complement their portfolios with higher growth potential – and willing to ride through potential volatility – a small-cap index fund could be the right place to start.

Disclaimer
This document is for informational purposes only and does not constitute investment advice or constitute an offer or solicitation to sell or buy any securities. This document is for intended recipients only. The views expressed herein are based on internal data, publicly available information and other sources believed to be reliable. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Certain statements in this document may contain forward-looking information, including projections, estimates, and other statements regarding future events or the future financial performance of the Scheme. These statements are based on current expectations and assumptions and actual results may differ materially due to various risks and uncertainties. Neither the AMC, Trustee Company, sponsors or its affiliates nor any person connected with them shall accept any liability arising from the use of this document.
The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Source:
[1] www.niftyindices.com

[2] Methodology Document for Equity Indices

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