The market capitalisation of small-cap segment has zoomed five-fold from ₹17 lakh crore to ₹92 lakh crore by the end of 2024, signalling compound annual growth rate (CAGR) of 27.6 per cent, a report by Bajaj Finserv AMC revealed.
Meanwhile, the large-cap and mid-cap segments recorded CAGR of 14.5 per cent and 21.6 per cent, respectively, during the same period.
The stock broking platform Bajaj Finserv AMC noted that the Nifty Small Cap 250 Quality 50 TRI index has outperformed the Nifty Small Cap 250 TRI in fourteen of the last nineteen financial years. Overall, the quality index delivered higher returns than all other indices in nine financial years from FY10.
The study highlighted the contribution of small-caps to the overall market capitalisation grew 1.4 times over the last three years, and their share to corporate profits surged 2.5 times in the past four years. This indicated the broader range of investment opportunities it now presents.
In the second half of FY25 small-caps witnessed a correction, creating opportunity for investors to accumulate quality small caps at better valuation.
As of April 2025, most small caps continue to trade below their 52-week highs, making the segment appealing from a valuation standpoint. While the small-cap index gained only 4 per cent since FY24, profit after tax (PAT) grew by 38 per cent, it said.
However, despite the price correction, small-cap profits rose to ₹29,941 crore in FY25 from ₹21,669 crore in FY24. Nearly 74 per cent of the top 250 small-cap companies reported a double digit returns on capital employed (RoCE).