BSE SmallCap Index

The BSE SmallCap Index measures the performance of the small cap segment within the BSE AllCap universe. It is published by BSE Index Services Private Limited, a subsidiary of BSE Limited.

The index represents the final 15% of the cumulative average daily total market capitalisation of companies in the BSE AllCap, subject to a buffer intended to limit frequent movement between size categories. Constituents are weighted according to their float-adjusted market capitalisation.

The BSE SmallCap can be used as a benchmark for understanding how this broader group of small cap companies is performing. However, the index itself cannot be purchased directly.

The selection of companies in the BSE Small Cap Index is based primarily on market capitalization rankings. Companies listed on the BSE are categorized into three groups:

• Large cap: The top 100 companies by market capitalization.
• Mid cap: Companies ranked from 101 to 250 by market caps.
• Small cap: All companies ranked 251 and beyond are classified as small cap companies.

This means that companies included in the BSE SmallCap Index fall outside the top 250 companies by size.

In addition to size, the BSE also looks at:

• Liquidity: The company’s shares should be actively traded.
• Trading frequency: The stock should be regularly bought and sold in the market.
• Regulatory compliance: The company must meet BSE’s rules and standards.

The index is reviewed and rebalanced periodically to ensure that it accurately represents the current universe of small cap companies. If a company grows bigger and moves into the mid cap category, or if it no longer qualifies, it is replaced by another eligible small cap stock.

The BSE SmallCap Index was launched on April 11, 2005. Its first value date is April 1, 2003, with a base value of 1,000. Data for periods before the launch date may include back-tested performance calculated using the applicable methodology.

Selection takes place in two broad stages. First, companies must qualify for the BSE AllCap. Eligible companies are then divided into large cap, mid cap and small cap groups based on their cumulative average daily total market capitalisation.

The companies covering the first 70% of market capitalisation are classified as large cap, the next 15% as mid cap and the final 15% as small cap. A buffer of five percentage points is used around the size boundaries to reduce unnecessary movement between categories.

Once selected, BSE SmallCap constituents are weighted by float-adjusted market capitalisation. This means that only shares considered available for public trading are used to determine their index weights.

A company must first qualify for the BSE AllCap universe. The methodology considers factors such as:

• Listing and domicile: The company must be domiciled in India and traded on BSE.
• Listing history: A listing history of at least six months is generally required. A shorter one-month period applies to eligible IPOs and spin-offs.
• Market size: The company must generally rank within the prescribed limits for average daily total and float-adjusted market capitalisation.
• Liquidity: The methodology considers trading frequency, turnover ratio, traded value and impact cost.
• Trading status: Companies that are suspended or placed in specified categories, such as the BSE SME platform, Z group or Graded Surveillance Measure list, are not eligible.

Companies that qualify for the BSE AllCap are assigned to the BSE SmallCap based on the size-classification process described above.

Source: BSE Index Services Private Limited, BSE AllCap Methodology.

The BSE SmallCap undergoes an annual reconstitution in September. Changes take effect from market opening on the Monday following the third Friday of September, using data up to the last trading day of July.

Quarterly reviews also take place in December, March and June. These reviews may lead to changes because of liquidity concerns, major corporate actions or changes affecting a company’s size classification. Price appreciation or depreciation alone does not ordinarily change a company’s size category between annual reconstitutions.

The BSE SmallCap does not use a fixed rupee-based market capitalisation range. Companies are classified according to their relative position within the BSE AllCap’s cumulative average daily total market capitalisation.

As of June 30, 2026, the total market capitalisation of BSE SmallCap constituents ranged from approximately ₹117.50 crore to ₹72,339.96 crore. The median was approximately ₹3,527.28 crore. These figures can change as share prices, constituents and the wider market change.

Source: BSE Index Services Private Limited, BSE SmallCap Index Insights, June 30, 2026.

The BSE SmallCap does not maintain fixed sector allocations. Sector weightage depends on the combined float-adjusted market capitalisation of the constituent companies in each sector. It therefore changes with share prices, corporate actions and index composition.

As of June 30, 2026, the sector-wise weightage was:

Source: BSE Index Services Private Limited, BSE SmallCap Index Insights, June 30, 2026.

The BSE SmallCap Index may experience sharper movements than indices focused on larger companies. Several factors can influence its performance:

• Company earnings: Changes in revenue, profitability, debt or cash flow may affect constituent stock prices.
• Economic conditions: Economic growth, inflation, interest rates and access to financing can influence smaller businesses.
• Market liquidity: Small cap shares may have lower trading liquidity, which can increase price movements during periods of heavy buying or selling.
• Investor sentiment: Changes in risk appetite can affect demand for small cap stocks.
• Valuations: High or low valuations may influence how stocks respond to earnings and market developments.
• Sector and global developments: Commodity prices, regulation, government policies and global events may affect individual sectors differently.

No single factor determines the movement of the index, and the influence of each factor can change over time.

Not necessarily. Investment experience alone does not determine whether small cap exposure is suitable. A product tracking the BSE SmallCap may be considered by investors who understand equity-market risk, can tolerate substantial price fluctuations and have a suitably long investment horizon.

Before investing, investors should consider their financial goals, existing portfolio and ability to remain invested during market declines. New investors who are uncertain about these factors may consider consulting a financial adviser.

There is no prescribed minimum investment period for products tracking the BSE SmallCap Index. However, small cap investing is generally approached with a long-term horizon because these companies and their share prices may move sharply across market cycles.

A longer horizon may provide more time to remain invested through periods of volatility, but it does not assure positive returns. The investment period should be aligned with the investor’s goal, risk appetite and the stated investment horizon of the chosen scheme.

Investors cannot invest directly in the BSE SmallCap Index. Exposure may be available through an index fund or exchange-traded fund that specifically tracks the index, subject to product availability.

An actively managed small cap mutual fund may invest in companies from the same market segment, but it does not necessarily replicate the BSE SmallCap. Similarly, purchasing a few index constituents directly is stock investing and does not provide the same exposure as holding the complete index in its prescribed weights.

Before choosing a product linked to the BSE SmallCap, investors may consider:

• Risk appetite: Small cap stocks can experience substantial short-term price movements and losses.
• Investment horizon: Check whether the investment period suits the chosen scheme and financial goal.
• Portfolio allocation: Consider how small cap exposure affects the overall concentration and risk of the portfolio.
• Investment route: Check whether the product tracks the BSE SmallCap or merely uses a small cap index as its benchmark.
• Costs: Review the expense ratio, tracking error, brokerage and other applicable costs.
• Liquidity: ETFs and individual small cap stocks may have varying levels of market liquidity.
• Investment objective: Review whether the scheme’s objective and strategy align with the investor’s requirements.

Small cap investments are considered high-risk, high-return. Since small cap companies are in their growth phase, their earnings, profits, and stock prices can swing widely depending on business conditions.

For beginners, small-cap investing can be challenging because:

• Prices of small cap stocks can be very volatile in the short term.
• During market downturns, small caps usually fall more than large cap stocks.
• These companies may face issues like limited resources, competition, or regulatory challenges.

However, small caps also have the potential to become future mid caps or even large caps if they succeed. Long-term investors who are patient and willing to take some risk can benefit.

For new investors, it is recommended to:

• Start with a small allocation (5–15% of the portfolio).
• Invest through a mutual fund instead of picking individual small cap stocks.
• Stay invested for at least 5–7 years to ride out volatility.

BSE SmallCap Index returns can vary significantly depending on the period selected. As of June 30, 2026, the total return version of the index recorded the following returns:

Returns for periods longer than one year are annualised.

Source: BSE Index Services Private Limited, BSE SmallCap Index Insights, June 30, 2026.

Past performance may or may not be sustained in future.

The outlook for BSE SmallCap companies can depend on earnings growth, valuations, access to capital, domestic demand and the wider economic environment. Government policies, interest rates, commodity prices and global developments may also affect sectors and companies differently.

Some small cap companies may expand over time, while others may face challenges related to scale, funding, competition or business execution. Therefore, the potential performance of the segment cannot be assumed from economic growth alone.

The BSE SmallCap had 1,251 constituents as of June 30, 2026. Its ten largest constituents by index weight were:

Data as of June 30, 2026. Constituents and weights can change. Refer to the BSE Indices website for the latest and exhaustive list.

Please note that the reference to any industry, sector or stock is provided for illustrative purposes only. This should not be construed as a research report or a recommendation to buy or sell any security or sector.

The BSE SmallCap and BSE 250 SmallCap TRI both represent small cap companies, but they differ in their coverage, number of constituents and review schedules.

The main difference is the coverage of the two indices, not merely whether dividends are included. Both indices have price-return and total-return variants.

The Bajaj Finserv Small Cap Fund uses the BSE 250 SmallCap TRI as a benchmark. This means that the index acts as a reference point to compare the fund’s performance.

The fund manager actively selects a basket of small cap stocks that have strong business potential. The aim is to generate potential returns that are higher than the BSE 250 SmallCap TRI on a long-term basis while managing risks through diversification.

For investors, this means they don’t need to research and buy individual small cap stocks themselves. By investing in the Bajaj Finserv Small Cap Fund, they can participate in the growth potential of India’s small cap companies with the guidance of professional fund management.

The BSE SmallCap and Nifty Smallcap 250 both represent small cap companies, but their universes, construction rules and number of constituents differ.

The two indices may therefore have different constituents, sector weights and performance even though both represent the small cap segment.