 "Mutual funds (MFs) are gearing up with offerings centered on the ‘quality' theme, as this investment approach is expected to rebound following three years of underperformance compared to the ‘value' theme.")
The Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey has cautioned mutual funds against investing heavily in microcap companies, citing liquidity constraints and volatility. Retail investors who invest directly in these stocks or indirectly through mutual funds need to be mindful of the associated risks.
What are microcaps?
Sebi classifies companies into large-cap (1–100 by market capitalisation), mid-cap (101–250), and small-cap (251 and beyond). Microcaps are firms ranked beyond the top 500 by market capitalisation. The Nifty Microcap 250 Index covers those ranked 501–750. These are often small, under-researched businesses operating in niche areas.
Unlike penny stocks,
