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SchemesDisclaimer The calculator alone is not sufficient and shouldn't be used for the development or implementation of an investment strategy. This tool is created to explain basic financial / investment related concepts to investors. The tool is created for helping the investor take an informed investment decision and is not an investment process in itself. Bajaj Finserv AMC has tied up with AdvisorKhoj for integrating the calculator to the website. Mutual Fund does not provide guaranteed returns. Also, there is no assurance about the accuracy of the calculator. Past performance may or may not be sustained in future, and the same may not provide a basis for comparison with other investments. Investors are advised to seek professional advice from financial, tax and legal advisor before investing in mutual funds.
Why choose the Nifty Smallcap 250 Index?
The Nifty Smallcap 250 Index includes companies ranked 251 to 500 by market capitalisation. It serves as a widely tracked benchmark in India, reflecting the performance of smaller firms relative to the overall market. It may be suitable for investors with a higher risk appetite and a long-term investment horizon.
Nifty Smallcap 250 TRI vs BSE 250 SmallCap TRI
Why Bajaj Finserv Small Cap Fund?
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MORE ABOUT Nifty Smallcap Index
The Nifty Smallcap Index is officially called the Nifty Smallcap 250. It is a stock market index developed and maintained by NSE Indices Limited, a subsidiary of the National Stock Exchange of India (NSE). It is designed to measure the performance of smaller-sized companies in terms of market capitalisation listed on the exchange. This makes the Nifty Smallcap Index an important benchmark for tracking potential growth opportunities among India’s smaller listed businesses.
Small cap companies are typically younger and in their expansion phase. Many operate in niche or emerging sectors of the economy. Being relatively smaller in size, they hold the potential to grow more than their larger, established peers. However, this also means higher volatility.
For investors, the index serves as a benchmark to assess how small cap companies are collectively performing. It also helps mutual fund houses and portfolio managers design investment products that provide exposure to the small cap segment of the market.
The selection of companies in the Nifty Smallcap 250 Index is primarily based on their free-float market capitalisation. Companies listed on the NSE are categorized into three groups:
- Large cap: The top 100 companies by market capitalisation.
- Mid cap: Companies ranked from 101 to 250 by market capitalisation.
- Small cap: Companies ranked 251 and above by market capitalisation.
Thus, the Nifty Smallcap 250 includes companies that fall outside the top 250 by size.
Apart from size, NSE also considers other parameters such as:
- Liquidity: The company’s shares must be actively traded.
- Trading frequency: Stocks should be regularly bought and sold in the market.
- Regulatory compliance: The company must adhere to NSE’s listing and disclosure norms.
The index is reviewed and rebalanced semi-annually to ensure it remains representative the small cap segment. If a company grows large enough to move into the mid cap category or fails to meet the inclusion criteria, it is replaced with another eligible small cap company.
The Nifty 250 Smallcap Index was introduced in April 2016 by NSE Indices Limited. Since its launch, it has become an established benchmark for tracking India’s small cap segment.
The creation of this index made it easier for investors, analysts, and fund managers to compare the performance of small caps with mid cap and large cap counterparts. Over time, it has played a key role in building awareness about small cap investing as a distinct category in the Indian equity market.
Investors cannot directly purchase the index but can get exposure through various investment options:
- Small cap mutual funds – Managed by professional fund managers, these funds build portfolios comprising small cap companies. Investors can invest through lumpsum or SIP (Systematic Investment Plan). Mutual funds also help achieve diversification, reducing the risk of concentration in a few stocks.
- Index funds – Several Asset Management Companies (AMCs) offer index funds that track the Nifty Smallcap 250 Index. Investing in these funds provides returns that are aligned with the index, subject to tracking error.
- ETFs (Exchange-Traded Funds) – ETFs are listed on stock exchanges and trade like regular shares. An Nifty Smallcap ETF replicates the index and may be suitable for investors preferring a passive, low-cost approach.
- Direct equity investment – Experienced investors with high risk appetite and research capabilities may choose to directly invest in small cap stocks that form part of the index. However, this involves higher risk and requires continuous monitoring.
Whichever route is chosen, experts generally recommend keeping small caps as part of a diversified portfolio rather than investing entirely in them. This helps balance their higher risk with the relative stability of large cap and mid cap holdings.
Small cap investing carries higher risk and higher potential returns. Since these companies are still expanding, their profits and stock prices may fluctuate significantly with changing market and business conditions.
For beginners, investing in small caps may be challenging because:
- Small cap stock prices can be highly volatile in the short term.
- During market corrections, small caps generally fall more than large caps.
- These companies may face challenges such as limited scale, funding constraints, or regulatory hurdles.
However, small caps have the potential to evolve into future mid caps or even large caps over time. Long-term investors who are patient and willing to accept volatility may benefit from this segment.
For new investors, it may be suitable to:
- Start with a modest allocation (around 5–15% of the portfolio).
- Prefer small cap mutual funds or index funds instead of direct stock selection.
- Stay invested for a long period (at least 5–7 years) to help absorb short-term volatility and benefit from potential growth.
The Nifty Smallcap Index has shown relatively strong performance over the long term, though it has experienced several periods of sharp fluctuations.
The outlook for India’s small cap segment appears encouraging due to multiple structural and economic growth factors:
- Strong economic growth: As India moves towards potentially becoming the world’s third largest economy by 2030*, smaller companies may benefit with increased economic activity.
* Source: Centre for Economics and Business Research (CEBR). - Government initiatives: Efforts like ‘Make in India’, PLI schemes, and infrastructure investment are expected to create new opportunities for smaller enterprises.
- Rising domestic consumption: A growing middle class, rising incomes, and increasing urbanization are likely to support consumption-driven growth for small cap companies.
At the same time, investors should note that small caps remain sensitive to interest rates, inflation, and global market movements. While the long-term outlook looks positive, short-term fluctuations are part of the journey.
Some listed companies on the Nifty Smallcap 250 Index are as follows:
| Karur Vysya Bank Ltd. |
| IFCI Ltd. |
| Go Digit General Insurance Ltd. |
| Cohance Lifesciences Ltd. |
| Vijaya Diagnostic Centre Ltd. |
| Navin Fluorine International Ltd. |
| Wockhardt Ltd. |
| Bombay Burmah Trading Corporation Ltd. |
| Aditya Birla Real Estate Ltd. |
| Trident Ltd. |
| Indegene Ltd. |
| Inox Wind Ltd. |
| Gland Pharma Ltd. |
| Praj Industries Ltd. |
| Chambal Fertilizers & Chemicals Ltd. |
*Data as of November 6, 2025. Source: NSE India Please refer to the exchange website for the exhaustive list of Nifty Smallcap Companies.
Please note that the reference to any industry/sector/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.
| Aspect | Nifty Smallcap 250 PR (Price Return) | Nifty Smallcap 250 TRI (Total Return Index) |
|---|---|---|
| Coverages | 250 small cap stocks (ranked 251st to 500th in Nifty 500) | 250 small cap stocks (ranked 251st to 500th in Nifty 500) |
| Return Measurement | Reflects only the change in the share prices of the constituent companies (capital appreciation). | Reflects Total Returns, including both price changes (capital appreciation) and the returns from dividends assumed to be reinvested. |
| Benchmark Focus | Represents overall small cap market trends | Highlights leading small cap companies with total return insight |
| Focus | Focuses on pure price performance and capital gains. | Focuses on the actual or complete economic return an investor would receive by holding the index and reinvesting dividends. |
| Purpose | Used to track the overall market sentiment and price-based movement of the segment. | Used as a more accurate benchmark for mutual funds and ETFs, as it represents the true return potential for an investor. |
The Bajaj Finserv Small Cap Fund is benchmarked against the BSE 250 SmallCap Index TRI.
The fund manager actively constructs a diversified portfolio of small cap companies with strong fundamentals and long-term growth potential that are trading at or below their fair value. The objective is to generate potential long-term returns above the benchmark while managing risks through quality stock selection and diversification.
For investors, this allows participation in the growth potential of India’s small cap space without the need to research or select individual stocks. By investing in the Bajaj Finserv Small Cap Fund, they can benefit from professional fund management. For detailed scheme information or to invest, click here.
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FAQS
Investing directly in Nifty small cap stocks involves higher volatility, lower liquidity, and greater sensitivity to market movements. While small cap companies may offer high potential returns, they can also face significant short-term losses during market corrections or adverse economic conditions.
Small cap stocks are highly sensitive to changes in market sentiment. During volatile phases, their prices can swing sharply, causing potential short-term declines. Long-term investors should focus on company fundamentals and growth potential instead of reacting to daily price fluctuations.
Both NSE and BSE are regulated, reliable exchanges in India. NSE generally offers higher liquidity and faster trade execution, while BSE has a broader history and more listed companies. The choice depends on trading convenience, stock availability, and personal preference.
During a market correction, avoid emotional decisions or panic selling. Review the fundamentals of your holdings, maintain a long-term perspective, and consider SIPs to benefit from rupee-cost averaging, as small cap stocks may recover over time with improving market conditions.
NSE is the largest stock exchange in India in terms of daily turnover and trading volume. BSE is older and lists a greater number of companies but records comparatively lower trading activity.
Lot sizes on NSE vary by segment and instrument type. For equity shares, one lot typically equals one share, while futures and options contracts have specified lot sizes determined periodically by the exchange.
Neither is inherently better. Both are regulated, reliable exchanges with strong systems and investor safeguards. NSE offers greater liquidity and faster execution, while BSE provides historical depth and wider company listings. The choice depends on investor preferences and trading requirements.
No, direct cross-exchange trading is not possible. If you buy a stock on NSE, you must sell it on NSE. However, since many stocks are listed on both exchanges, you can choose which exchange to trade on before making a purchase.
Whether a stock listed on NSE is suitable depends on its fundamentals, valuation, and long-term business potential. Evaluate financial strength, industry outlook, and growth drivers before investing rather than choosing based solely on the exchange.
Nifty small cap stocks may deliver potential long-term wealth creation due to growth opportunities, but they carry high risk. Investors with patience, long investment horizons, and higher risk appetite may consider exposure through SIPs or diversified small cap mutual funds.