Small caps steal the show as investors pile in
Investors are gravitating towards smaller and mid-sized companies in India's stock market, according to recent data. In the first four months of FY27, nearly ₹25,200 crore was poured into small-cap funds, nearly half of the total ₹51,000 crore invested in the entire FY26. Mid-cap funds also saw a surge with ₹23,218 crore flowing in, making up about 44% of the total ₹52,800 crore invested in the same period.
In contrast, large-cap funds received a mere ₹4,863 crore, accounting for only around 20% of the ₹24,000 crore inflow in the previous fiscal year.
The surge in investments has been more pronounced this year compared to the previous one. Small-cap funds attracted 42% of their full-year FY25 inflow in the first four months, compared to 36% for mid-cap funds and 33% for large-cap funds. This trend continued from the previous year, where small-cap funds received ₹17,723 crore in the first quarter, mid-cap funds garnered ₹15,059 crore, while large-cap funds collected ₹7,741 crore.
Dinshaw Irani, CEO of Helios Capital Asset Management, points out that many small-cap companies have enhanced their balance sheets, reduced leverage, and improved debt-to-equity ratios. This makes them more resilient against business cycles. He also notes that the large-cap universe includes several sectors facing earnings pressure, particularly IT and FMCG. This difference in earnings prospects is making small-caps and mid-caps more appealing to investors, despite their higher risk.
These smaller companies tend to be more volatile and riskier than large caps, suggesting that investors are showing a greater willingness to take risks. The increase in investments in mid-cap and small-cap funds echoes the strong performance of these stocks over the past year. The BSE 250 SmallCap Index rose by 6.8% while the BSE 150 MidCap Index gained 9.4%.
The BSE Sensex, however, fell by 4.4% during the period, while the BSE 100 Index remained unchanged. Experts attribute this heightened interest in small caps to a combination of improving earnings, attractive valuations, and robust domestic liquidity.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
