Small Cap on WebNotes

How to select a small-cap mutual fund

Tue, 19 May 2026 00:00:00 +0000

Small-cap fund selection requires the longest horizon, highest tolerance, and most disciplined SIP behaviour. The reward (long-term alpha) is real but the path is brutal.

Conflict-of-interest disclosure. This guide is published by WebNotes Editorial Team for informational purposes. WebNotes has no commercial relationship with any AMC or platform. No affiliate commission is earned.

Market-risk disclaimer. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Small-cap drawdowns of 50-65% are normal; recovery can take 3-5 years.

AUM size classification of mutual funds in India

Tue, 12 May 2026 00:00:00 +0000

AUM size classification in Indian mutual funds refers to the categorisation of equity mutual fund schemes based on the market capitalisation range of the stocks they are mandated to invest in, as defined by SEBI’s October 2017 scheme categorisation circular. The terms “large-cap,” “mid-cap,” and “small-cap” refer to the capitalisation of the portfolio’s underlying securities, not the fund’s own assets under management.

The AUM-based classification of fund schemes (by their own AUM size) is a separate concept, used for TER slab determination and industry concentration analysis.

NIFTY Smallcap 250 TRI

Tue, 12 May 2026 00:00:00 +0000

The NIFTY Smallcap 250 Total Returns Index (NIFTY Smallcap 250 TRI) is the dividend-reinvested variant of the NIFTY Smallcap 250 index, published by NSE Indices Limited. The index covers the 250 companies ranked 251st to 500th by full market capitalisation among NSE-listed stocks – the small-cap universe as formally defined by SEBI. Highly volatile and relatively illiquid compared with large-cap or midcap indices, the NIFTY Smallcap 250 TRI is nonetheless a key benchmark for the growing small-cap equity mutual fund category in India.

SEBI multi-cap reclassification circular (September 2020)

Tue, 12 May 2026 00:00:00 +0000

The SEBI multi-cap reclassification circular of 11 September 2020, formally Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/185, mandated that all mutual fund schemes categorised as “multi-cap funds” must invest a minimum of 25 percent each in large-cap, mid-cap, and small-cap stocks, with no more than 25 percent in any category left to fund manager discretion. Before this circular, multi-cap funds had operated with complete investment flexibility across market capitalisations, and in practice most had accumulated predominantly large-cap heavy portfolios with minimal mid and small-cap allocations despite their multi-cap category designation. The circular required these funds to substantially increase their small-cap and mid-cap allocations, triggering one of the largest mandatory portfolio rebalancing events in the history of the Indian mutual fund industry . It also prompted the Securities and Exchange Board of India to create a new “flexi-cap fund” category to preserve the option of genuinely flexible equity mandates without the new minimum allocation requirements.