Small-cap stocks trade far below peaks, signalling entry opportunity: Abakkus Mutual Fund

Nearly half of small-cap stocks are trading roughly 40 per cent below their all-time highs

A significant portion of small-cap universe is currently trading well below its historical peaks, offering investors a potential entry window as valuations reset after recent corrections.

According to internal research by Abakkus Mutual Fund, nearly half of small-cap stocks within the ₹2,000-₹34,700 crore market-cap bracket are trading roughly 40 per cent below their all-time highs, reflecting the impact of market volatility but also opening scope for strategic long-term allocation.

Small-cap stocks tend to be more volatile than large-caps, but research highlighted by Abakkus Mutual Fund shows they have delivered stronger long-term returns. SIP investments tracking the Nifty Smallcap 250 have generated a CAGR of about 17 per cent since September 2016, compared with roughly 12 per cent for the Nifty 50, with the small-cap index also outperforming over three- and five-year periods.

Small caps expand

Between CY2019 and CY2025, the market capitalisation of small caps expanded sharply from ₹16 trillion to ₹83 trillion, representing a 5.3-fold increase in value. This growth significantly outpaced other segments of the market, with small caps recording much faster appreciation than large caps, which grew about 2.55 times, and mid caps, which rose around 3.89 times over the same period, the findings read.

“A meaningful portion of companies in the ₹2,000 crore to ₹34,700 crore market capitalisation bracket are now available at improved risk–reward levels. Most importantly, exposure to sunrise industries and varied sectors that are difficult to access in the large-cap space are majorly available in the small-cap category,” said Vaibhav Chugh, CEO, Abakkus Mutual Fund.

According to the study, investors may find opportunities to accumulate fundamentally strong companies at more favourable valuations, particularly in sunrise sectors such as defence, electronics manufacturing, renewables, AI-led services, and healthcare-related industries that are less represented in large-cap indices.

Industry participants also highlight that small caps, despite their higher volatility profile, have historically delivered strong long-term compounding when approached with patience and disciplined allocation strategies.

Published on February 17, 2026