The BSE Smallcap index, which represents the bottom 15% of the total market capitalization of the BSE AllCap, includes 939 stocks. Of these, shareholding data for 730 companies as of the March quarter is available, while the rest are yet to disclose their latest shareholding pattern.
The most notable increases in retail holdings were seen in Vakrangee (up 6.5%), One Mobikwik Systems (up 6.3%), and Spandana Sphoorty Financial (up 6%).
In 66 other stocks, the retail holding has gone up by 1% or more and up to 4.94%. Some of these stocks include Dreamfolks Services, DAM Capital Advisors, EKI Energy Services, Jindal Drilling & Industries, Samhi Hotels Aarti Pharmalabs, Hindustan Construction Company, Barbeque-Nation Hospitality, KRN Heat Exchanger and Refrigeration and Computer Age Management Services (CAMS).
The other widely tracked smallcap stocks that have seen retail ownership go up QoQ in the quarter gone by are PVR Inox, Jupiter Wagons, Balu Forge Industries, Can Fin Homes, Texmaco Rail & Engineering, Angel One, and Sobha between 2.2% and 0.92%.
By retail ownership, we mean individual investors holding shares worth Rs 2 lakh in a company. “The rise in retail holdings across smallcaps signals a return of risk appetite post the sharp correction earlier this year. Trump’s tariff pause was the catalyst—but what’s striking is the selectivity as investors are clearly differentiating, not rushing blindly. This isn’t euphoria—it’s opportunistic repositioning after valuations reset,” Anirudh Garg, Partner and Fund Manager at Invasset PMS, said, commenting on the prevailing trends.To give some perspective, the BSE Smallcap index fell 29% from a peak of 57,827.69 on October 1, 2024, to hit the lows of 41,013.68 on April 7, 2025. While they are still down 18% (index level) from the peak, smallcaps have clawed back from the bear territory.
A 20% or higher fall is seen to be a bear zone for stocks/indices.
Kush Gupta, Director at SKG Investment & Advisory expects the trend of increased retail shareholding to last longer than one expects. In his view, investors remain confident about the space notwithstanding a one-sided correction for the past 4 months, which led to 40-50% downfall in prices of several stocks.
“We are seeing a larger allocation to smallcap space in portfolios than ever before, it is no longer a space that is only considered investable by HNIs or large family offices who can afford to risk their capital a little more than the retail investors. This democratisation of small cap is a huge shift in the industry and we will witness capital allocation to this space at a faster speed than we have before. It is safe to say that investors are seeing value investment opportunities in small caps returning back after witnessing a selling cycle,” he added.
The BSE Smallcap index has already recovered 20% from the lows and on Tuesday closed at 49,143.12.
Smallcaps with QoQ cut in retail holding
The sharpest cut of 16% in retail shareholding was seen in Embassy Developments and it was followed by MM Forgings and Kamdhenu with 14% and 8% QoQ drop. In 40 other stocks, the cut was between 7% and 1%. Among them are MAS Financial Services, Sundrop Brands, Kitex Garments, Camlin Fine Sciences, Shaily Engineering Plastics, The South Indian Bank, RBL Bank, Restaurant Brands Asia, Suyog Telematics, Aditya Vision, GRM Overseas, Vimta Labs, Coffee Day Enterprises, Aavas Financiers, Ujjivan Small Finance Bank, Thangamayil Jewellery and Prataap Snacks.
The other widely tracked smallcap stocks that have seen retail ownership go down sequentially in the January-March quarter include CarTrade Tech, Nazara Technologies, Poonawalla Fincorp, Gujarat State Fertilizers & Chemicals, Anand Rathi Wealth, Bharat Dynamics, Nuvama Wealth Management, Garden Reach Shipbuilders & Engineers, Birlasoft, Cochin Shipyard, and Honasa Consumer. The stake has dipped between 1.4% and 0.15%
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Status quo stocks
Meanwhile, there has been no change in retail holdings in these six stocks viz. Blue Dart Express, Elantas Beck India, Kirloskar Industries, Praj Industries, Rama Steel Tubes, and Uniphos Enterprises.
Time to make positional bets?
Trump’s tariff scare still lingers as the 90-day pause will end in July. The domestic markets have stablised as Foreign Institutional Investors (FIIs) have made a comeback to the domestic market. They have purchased Indian equities for the past five trading sessions, pumping in Rs 17,251 crore.
The IMF has revised India’s FY26 GDP growth forecast downwards to 6.2% due to trade tensions and US tariffs, with a further reduction to 6.3% projected for FY27.
Prior to this, the Reserve Bank of India (RBI) and ratings agency Fitch had cut their estimates on India. In the case of market turmoil or economic slide, the preference could shift to largecap counters.
Garg is of the view that the current set-up justifies selective positional bets on smallcaps amid caution. “Valuations have reset meaningfully post-correction, and retail interest has returned. However, this window is temporary and expires in July, leaving room for both opportunity and risk. Smallcaps tend to outperform in early-stage recoveries, and India’s macros—cooling inflation, stable policy, rising capex—support a near-term rally,” he warned, adding that global trade overhang remains.
Gupta of SKG Investment recommends taking positional bets in companies that have a steady order book, strong management and a good track record i.e. those companies that have experienced downtrends in the past.
3 tips to make a move in smallcaps:
1. Garg calls the current situation as a tactical opportunity and not a structural bet. He recommends focusing on domestically driven, low-debt smallcaps with earnings visibility.
2. Garg prefers staying away from sectors like metals and IT in the smallcap space.
Metals are too exposed to global pricing cycles and the recent pause on Chinese tariffs could trigger supply distortions, hurting pricing power. On the other hand, smallcap IT is facing demand headwinds due to the US slowdown.
The dollar is weakening and there is a real risk to export-linked revenue stability, Invasset PMS analyst said. Auto, real estate, and metals are also ‘Avoid’ for Gupta.
3. Gupta is cautious about sectors that rely on discretionary spending as consumers become defensive when the economy is slowing. Smallcap stocks related to travel, household goods, hospitality, and consumer durables remain vulnerable, according to him.
His top picks include BLS International, Integrated Industries, MOS Utility, Master Trust, OBSC Perfection, Healthcare Global Enterprise, Rama Steel, and Fedder Holdings.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
