Nearly Half Of Small-Cap Stocks Trade 40% Below Peaks, Says Abakkus Study

According to a study conducted by Abakkus Mutual Fund and published on February 18, almost half of small-cap stocks in India, which have market capitalisation ranging between ₹2,000 crore and ₹34,700 crore, are now trading almost 40% below their all-time highs.

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The researchers blamed the fall on the recent market corrections and re-evaluations of the small-cap market. It was observed that these resets usually occur after robust rallies and are price readjustments, and no structural calls in the section.

The fund house says that the correction has seen a significant number of companies with market capitalisations between ₹2000 crore to ₹34700 crore of market capitalisation at lower levels than they were before.

Small-Caps’ Market Share Expands To 19%

The study highlighted the high growth pace of the small-cap segment in the last six years. The total market capitalisation of small-cap firms grew by 5.3 times, a 5.3-times increase from 2019 to 2025, totalling ₹83 trillion, against ₹16 trillion.

Comparatively, the data used in the report showed that large-cap companies experienced a 2.55-times growth in market capitalisation over the period, but the mid-cap companies experienced a 3.89-times growth.

Due to this expansion, small-cap firms now have a share of 19% of the total equity market capitalisation in India, compared to 11% in 2019. The article claimed that this goes with the growing activity of emerging businesses and sectors in the listed universe.

Sectoral Composition And Industry Exposure

The report pointed out that small-cap companies give exposure to a number of industries, which are relatively under-represented in large-cap indices. These are aerospace and defence, pharmaceuticals and biotechnology, electronics manufacturing services, electric vehicles and batteries, artificial intelligence-led services, renewable energy, medical devices, travel and tourism and auto components.

According to the study, this sectoral dispersion reflects the diversification of the listed companies in India and the rise of the emerging industries in the wider market ecosystem.

Long-Term Returns Of Small-Cap Index

The research involved a comparison between the long-term performance of the Nifty Smallcap 250 and the Nifty 50. It revealed that systematic investment plan (SIP) investment in the Nifty Smallcap 250 has brought about a compound annual growth rate (CAGR) of approximately 17% since September 2016, as compared to Nifty 50, which has been at 12%.

According to the disclaimer that accompanied the research, the SIP returns were computed under the assumption that the monthly investments would be made on the first of every month between September 1, 2016, and January 31, 2026.

It was also reported that in more than three years and five years, the small-cap index performed better than the large-cap index.

Abakkus mutual fund has stated that close to 50% of small-cap stocks are trading at almost 40% of their peaks despite the segment in the market capitalisation growing to ₹83 trillion, and share in the overall equity market capitalisation grew to 19%.