BSE Small-Cap

What is the BSE SmallCap index?

The S&P BSE SmallCap index, more commonly known as BSE SmallCap, is a stock market index that tracks the performance of small-cap companies listed on the Bombay Stock Exchange. Small-cap companies are entities that are ranked above 251 in terms of total market capitalisation.

The BSE SmallCap index provides investors with insight into the performance of these smaller companies and allows them to gauge the overall health of the small-cap segment of the market. Investors use the index as a benchmark to evaluate the performance of their small-cap investments or to compare the returns of actively managed small-cap mutual funds. Additionally, the index serves as a tool for financial institutions, analysts, and researchers to study trends in the small-cap sector and formulate investment strategies.

The S&P BSE SmallCap index is designed in such a way that it represents 15% of the total market capitalisation of the S&P BSE AllCap index. The top five sectors in BSE SmallCap include capital goods, finance, healthcare, housing and information technology. Meanwhile, the top 10 index constituents by weightage are as follows:

Note: The data is as of March 28, 2024.

How are stocks chosen for the BSE SmallCap index?

The index committee of the Bombay Stock Exchange is responsible for selecting stocks for the S&P BSE SmallCap index. According to the index factsheet, only stocks that feature in the S&P BSE AllCap index are eligible for inclusion.

The constituents of the BSE AllCap index are ranked in descending order of their cumulative average daily total market capitalisation. Once that is done, the stocks that make up the bottom 15% of the market capitalisation of the AllCap index are included in the BSE SmallCap index. The top 85%, on the other hand, are sorted into other market capitalisation-based indices of the Bombay Stock Exchange.

The BSE SmallCap index is reviewed by the index committee of the BSE every quarter of a financial year in June, September, December and March. The index is also rebalanced once every year in September. Such periodic reviews and rebalancing are conducted to assess the eligibility of existing constituents and to make necessary adjustments to ensure that the index accurately represents the performance of the small-cap segment of the market.

When was the BSE Small Cap index introduced?

The Bombay Stock Exchange introduced the S&P BSE SmallCap index on April 11, 2005, to represent the small-cap segment of the Indian stock market. Since its launch, the index has become a vital tool for investors, financial institutions and analysts to assess the performance of small-cap stocks and formulate investment strategies tailored to this segment of the market.

Although the index was launched in the year 2005, its first value date has been set for April 1, 2003. The index value before the launch date is calculated using hypothetical backtesting based on the index’s methodology.

How to invest in the S&P BSE SmallCap index?

Since the S&P BSE SmallCap is a market index, which is essentially a collection of small-cap stocks from different sectors, you cannot invest in it directly. However, you can consider investing in some mutual funds that include certain stocks from the index. Doing so could provide you with partial exposure to the index.

On the other hand, there may also be certain funds that invest in the same stocks as the BSE SmallCap in the same proportion or weightage. These funds are known as index mutual funds and are designed to replicate the performance of the index. Investing in them can give you complete exposure to the index.

BSE SmallCap FAQ's