India’s small-cap market sees fivefold growth surge

Mumbai

India’s small-cap companies have witnessed a massive fivefold jump in market value over the past seven years, growing at a strong Compound Annual Growth Rate (CAGR) of 27.6%, according to a report by Bajaj Finserv AMC.

The total market capitalisation of small-cap firms rose from Rs 17 lakh crore in 2017 to Rs 92 lakh crore by the end of 2024. This rise far outpaces large-cap and mid-cap companies, which posted CAGR growth of 14.5% and 21.6% respectively.

The report highlights how small-cap companies are playing a bigger role in India’s stock market. Their contribution to overall market value has grown 1.4 times in just three years, while their share in corporate profits jumped 2.5 times in the last four years.

Despite some price corrections in FY25, small-cap valuations remain attractive. Many stocks are still below their 52-week highs, offering long-term investors an opportunity to buy strong stocks at lower prices. While the Nifty Smallcap index rose just 4% since FY24, profits in the sector surged 38%—from Rs 21,669 crore in FY24 to Rs 29,941 crore in FY25.

Notably, 74% of the top 250 small-cap companies recorded a double-digit Return on Capital Employed (ROCE), showing their business strength.

The study also emphasised the value of quality. The Nifty Smallcap 250 Quality 50 TRI index outperformed the broader index in 14 of the last 19 years, offering better returns and lower volatility—even compared to large-cap indices in some periods.