Small-cap ETFs

Access India’s smaller, high-growth potential companies through a single ETF.
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What are Small-cap ETFs?

Small-cap ETFs are exchange traded funds that invest in the shares of smaller listed companies, typically tracking a benchmark such as the Nifty Smallcap 250 Index. These companies are usually earlier in their growth journey and can offer higher long-term growth potential, along with meaningfully higher volatility compared to large and midcap companies.

As passively managed, sector-specific funds,Small-cap ETFs aim to replicate the composition and performance of their underlying index rather than relying on active stock selection. This provides investors low cost, transparent access to often less-researched, small companies, without requiring investors to individually select and track each stock.

Benefits of investing in ETFs

Easy Portfolio Diversification

Get exposure to a wide range of stocks, bonds, or commodities with a single investment.

Low-Cost Investment

ETFs often cost less than traditional mutual funds due to lower expense ratios.

Flexibility & Variety

Choose from equity, debt, or gold to match your investment goals and risk profile.

Trade Anytime Like Stocks

Easily trade in ETFs during market hours at real-time prices as they are traded on stock exchanges.

Transparent Investing

Most ETFs disclose their holdings daily, so you have a clear picture about your investments.

Cost & Tax Implication

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Cost / feature
Details
Demat account
Required
Buy / sell mode
Real-time, on the stock exchange
Brokerage & statutory charges
Applicable
Exit load
As applicable to the individual ETF

*Expense ratios vary across Small-cap ETFs and may change from time to time. Please check the individual ETF's details before investing.

Taxation

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Tax implication
Details
Short-term capital gains (STCG)
20% on gains when units are held for 12 months or less
Long-term capital gains (LTCG)
12.5% on gains exceeding ₹1.25 lakh in a financial year when units are held for more than 12 months
Securities Transaction Tax (STT)
Applicable on the sale of equity-oriented ETF units on a recognised stock exchange
Frequently Asked Questions
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Are Small-cap ETFs suitable for all investors?
Small-cap ETFs carry higher volatility than large and midcap ETFs because small-cap companies are typically at an earlier stage of growth. They are generally more suitable for investors with a higher risk appetite and a long-term investment horizon, and should be assessed in line with individual financial goals.
How is the Nifty Smallcap 250 Index constructed?
The Nifty Smallcap 250 Index includes companies ranked 251 to 500 by full market capitalisation within the Nifty 500 universe, subject to eligibility norms on listing history, trading frequency and liquidity set by NSE Indices, and is weighted by free-float market capitalisation.
Why choose a Small-cap ETF over picking individual small-cap stocks?
Individual small-cap stocks can carry company-specific risk and, at times, lower trading liquidity. A Small-cap ETF diversifies this risk across 250 companies while offering exchange-traded liquidity, transparency of holdings, and a lower cost structure compared to actively researching and managing a portfolio of individual small-cap stocks.
What is the ideal holding period for a Small-cap ETF?
Given the higher volatility typically associated with small-cap stocks, a Small-cap ETF is generally better suited to a long-term investment horizon that allows the investor to ride out short-term market fluctuations.
How often is the Nifty Smallcap 250 Index rebalanced?
The Nifty Smallcap 250 Index is reconstituted on a semi-annual basis by NSE Indices to keep it representative of the current small-cap segment of the Indian equity market.