Equity Small Cap Index Funds

A comprehensive guide to equity small cap index funds. Learn how do they work, benefits, and more.
Equity Small Cap Index Funds
3 mins read
1 Apr 2024

What are equity small cap index funds?

Investing in mutual funds has evolved into a strategic and accessible way for individuals to grow their wealth. Among the ocean of options, one category that stands out for its potential for high returns is equity small cap index funds.

Before getting into the specifics of equity small cap index funds, it is essential to grasp the concepts of small cap funds and index funds.

  • Small cap funds focus on companies with a smaller market capitalisation. Usually, the companies ranking beyond 250 as per AMFI market capitalisation is categorised as a small-cap company. These companies, often termed as small-cap stocks, have the potential for substantial growth, but they also come with higher risk due to their size and volatility. Investors attracted to the prospect of aggressive growth often find small cap funds appealing.
  • Index funds, on the other hand, are a type of mutual fund designed to replicate the performance of a specific market indexes like NIFTY, SENSEX, etc. These funds aim to match the returns of the chosen index rather than outperform it. The appeal lies in their passive management, which typically results in lower fees compared to actively managed funds.

What are equity small cap index funds?

Equity small cap index funds combine the characteristics of small cap funds and index funds.

The objective of these funds is to mimic the performance of small-cap indices such as NIFTY Small cap 250, BSE 250 Small cap, and others. The goal is to invest in identical stocks as those included in the index, maintaining the same proportional allocation. Offering investors exposure to the growth potential of smaller companies while adopting a passive investment strategy.

Benefits of investing in equity small cap index funds

  1. Diversification: Small cap index funds provide diversification by investing in a basket of small-cap stocks, spreading the risk associated with individual companies.
  2. Lower Costs: As index funds follow a passive strategy, they generally have lower management fees compared to actively managed funds, enhancing the overall returns for investors.
  3. Growth Potential: Investing in small-cap stocks can offer significant growth potential, as these companies have room for expansion and can deliver robust returns during periods of economic upturns.

Who should invest in equity small cap index funds?

Equity small cap index funds are suitable for investors with a higher risk tolerance who seek potential high returns. They are ideal for those with a long-term investment horizon who can withstand the volatility associated with small-cap stocks.

How to invest in mutual funds on the Bajaj Finserv platform

Investing in mutual funds through the Bajaj Finserv platform is a straightforward process. Simply follow these steps:

Step 1: Visit the ‘Mutual Funds Listing’ page on the Bajaj Finserv platform
Step 2: Filter by scheme type, risk appetite, returns, etc, or choose from the top performing funds list.
Step 3: All the mutual funds of the particular category will be listed, along with the minimum investment amount, annualised return, and rating.
Step 4: Get started by entering your mobile number and sign in using the OTP.
Step 5: Verify your details using your PAN, date of birth. If your KYC is not complete, then you will have to upload your address proof and record a video.
Step 6: Enter your bank account details.
Step 7: Upload your signature and provide some additional details to continue.
Step 8: Choose and select the mutual fund that you want to invest in.
Step 9: Choose whether you want to invest as SIP or lumpsum and enter the investment amount. Click on ‘Invest Now’
Step 10: Select your payment mode i.e., net banking, UPI, NEFT/ RTGS.
Step 11: Once your payment is done, the investment will be complete.

Your investment will start reflecting in your portfolio within 2-3 working days.


Equity small cap index funds offer a compelling opportunity for investors seeking growth potential and diversification in their portfolios. While they come with higher risk, their long-term rewards can be substantial. Investors willing to embrace volatility for the prospect of significant returns should consider including equity small cap index funds in their investment strategy.

For those looking to navigate the mutual fund space, the Bajaj Finserv platform provides a user-friendly avenue to explore and invest in mutual funds, empowering individuals to take charge of their financial future.

Start investing now.