Smallcap funds tap into 'microcaps' as AUM expands, market gains depth

Average smallcap exposure beyond top 500 stocks rises to 31% from 22% in three years

Smallcap funds are increasingly tapping into the ‘microcap’ space amid a multifold jump in their assets and improved liquidity conditions in stocks beyond the largest 500.

 

In the past three years, the average exposure of smallcap funds to such stocks has increased from 22.4 per cent to 31.3 per cent, according to data from Morningstar Direct.

 

While the mutual fund (MF) industry recognises only three market capitalisation (mcap) baskets — largecap, midcap, and smallcap — the term ‘microcap’ is widely used by market analysts to refer to stocks beyond the largest 500 companies by mcap.

 

Smallcap funds have remained among