Small-cap funds typically invest approximately 80% of their assets in small-cap equities, with 8% allocated to large-cap stocks and 11% to mid-cap stocks. Approximately 50% of small-cap stock investments are in firms ranked between 251st and 500th in terms of market capitalization, while 29% are in companies placed between 501st and 1000th. According to a Ventura Securities survey, only 2% of funds are allocated to stocks ranked more than 1000th.

The research was undertaken by Juzer Gabajiwala, Director of Ventura Securities.

LIC's small cap fund has the greatest allocation of 68% in equities ranked below 500, followed by 18% in stocks with a market capitalization of less than Rs. 3,150 crore. Quant has the highest allocation to large-cap stocks. DSP and SBI are loyal to their labels, with more than 95% allocated to small-cap equities. The AUM of small cap mutual funds increased sixfold during the last five years, from November 2019 to November 2024, with an average annual growth rate of 48%.  There are 29 mutual fund schemes, with 23 being more than three years old.  In the last three years, only six new small-cap schemes have been introduced.

Key Findings: Top Performers, Trends

Small-cap mutual funds' Assets Under Management (AUM) increased sixfold over the last five years, from November 2019 to November 2024, at an average annual rate of 48%. This development demonstrates the great popularity of small-cap funds, which have received total inflows of Rs 1.03 lakh crore from FY 2019-20. Interestingly, theme and sectoral funds have garnered the most inflows, totaling Rs 2.27 lakh crore, accounting for 27% of total equity mutual fund inflows.

Bandhan Small Cap Fund, for example, has achieved an excellent 30% compounded annual growth rate (CAGR) over the last three years.However, these large returns are associated with a high amount of risk, as evidenced by the fund's high beta, a measure of volatility.

On the other hand, SBI Small Cap Fund has a lower beta of 0.66, making it less volatile and perhaps more stable, however this may result in lower returns compared to higher-risk funds.

In the table above, the value of the stock placed 251st in December 2019 has climbed by fourfold as of today. Similarly, the 500th company has increased sixfold, while the 1000th company has risen eightfold. Thus, based on the current market capitalization, the 500th business would have been categorized as a midcap stock in December 2019. And the stock that is currently ranked 1000th would have been 414th. Coincidentally, the current market capitalization of TTK Prestige is 11,714 crore (rank 498), whereas SMS Pharma's is 2061 crore (rank 1201). Interestingly, despite an increase in their market capitalization, their ranks have declined.