BAJAJ FINSERV ASSET MANAGEMENT LIMITED.
BAJAJ FINSERV ASSET MANAGEMENT LIMITED.
The Nifty Smallcap 250 Index is a widely used benchmark for investors tracking the country’s emerging indices. Also referred to as Nifty Smallcap, this index tracks the performance of companies listed 251 and beyond in terms of market capitalization on the National Stock Exchange. These are comparatively smaller companies and represent the emerging segment of India’s equity market. These businesses are considered to have the potential to deliver higher returns during favourable market phases but also involve higher risk. Investors can access the Nifty Smallcap 250 Index through index funds, mutual funds benchmarked against this index, or by directly investing in companies listed on the index.
Access to a carefully selected basket of listed small cap companies.
Chance to capture opportunities in expanding and developing businesses.
Exposure to companies that may offer intrinsic value and long-term potential.
Spread across a wide universe of smaller and emerging enterprises.
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.
Apart from the Nifty Smallcap, another widely used small cap benchmark is the BSE 250 SmallCap Index. Both comprise 250 companies ranked below the top 250 by market capitalisation and both are available in two variants — Price Return (PR) and Total Return Index (TRI). While the PR index reflects only price movements of constituent stocks, the TRI version includes both price appreciation and dividends reinvested, thus representing the total return an investor would earn if dividends were reinvested back into the index. The Bajaj Finserv Small Cap Fund is benchmarked against the BSE Smallcap 250 TRI.
Nifty Smallcap 250 TRI is maintained by NSE Indices Ltd, part of the National Stock Exchange. BSE 250 SmallCap TRI is maintained by Asia Index Pvt Ltd and is a part of the BSE (formerly Bombay Stock Exchange).
The BSE 250 SmallCap was launched in November 2017. Its first value date is September 16, 2005, and its base value is 1000. The Nifty Smallcap 250 was launched in April 2016, with a base date is April 1, 2005, and a base value of 1000.
Both indices are rebalanced semiannually – Nifty Smallcap 250 in March and September; BSE 250 SmallCap in June and December.
Benchmark reference
Uses the BSE 250 SmallCap TRI Index as a benchmark to compare performance.
3-in-1 approach
Combines quality, growth, and value to identify companies with strong fundamentals and long-term growth potential at reasonable valuations.
Bottom-up selection
Stocks are chosen based on individual company fundamentals, not just sector trends.
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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:
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:
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:
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:
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:
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:
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.
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.
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.
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Bajaj Finserv Limited, an unregistered Core Investment Company (CIC) under RBI Regulations 2020, is a part of the renowned Bajaj Group.
One of India’s leading and most diversified financial services institutions, Bajaj Finserv Ltd provides simple financial solutions to crores of people every day through its group companies. Through continuous innovation, it strives to enrich the lives of communities across the length and breadth of the country and make financial security accessible to all.
Our Investment Philosophy reflects what we, as an organisation, believe will generate a good return on equity investment for our investors in the long term. It dictates our goals and guides decision making.
Alpha (a) is a term used in investing to describe an investment strategy’s ability to beat the market.
Alpha is thus also often referred to as excess return or the abnormal rate of return in relation to a benchmark, when adjusted for risk. Essentially, it means doing better than the crowd without taking disproportionate risk.
Collecting superior information
Analysts and portfolio managers strive to collect superior information about the business and the management of the company. They try to generate superior earnings forecast and the balance strength of the company and the industry, thereby trying to 'beat the market' on information edge. This is an important source of alpha for an investor. However, over the years, retaining the information edge has become more difficult and expensive. With a whole lot of investors trying to collect superior information, how can an investor be sure to continuously have accurate and material information about the companies, ahead of others, all the time?
Processing information better
Even if you don't have material information earlier than the crowd, you can still generate better outcomes if you are able to process this information better. Investors develop models and algorithms with enhanced predictive powers to forecast the next move. Fund managers who invest based on some pure formal analytical models are quantitative managers. Here, the goal is to try and beat other investors based on the sophistication of procedures or analytics. The analytical edge can be quite useful until it gets copied by many, and then it may stop generating superior returns.
Exploiting behavioural biases
As the name suggests, this edge is achieved by superior behaviour in reacting to the inputs available to maximise alpha. Modern finance assumes people behave with extreme rationality. However, researchers in behavioural finance have shown that this is not true. Moreover, these deviations from rationality are often systematic. Behavioural managers try to exploit situations where securities are mispriced by the market because of behavioural factors. At Bajaj Finserv AMC, we endeavour to combine the best of these edges.
