.jpg)
Microcaps offer higher rewards for higher risk in the long run
LARGE CAP
Top 100 stocks in terms of market capitalisation fit in the large-cap universe. High market valuations, uneven earnings growth, and investors’ tilt toward stronger balance sheets drove large-cap outperformance. Although absolute gains were limited, the segment offered better relative returns and safeguarded capital, underscoring its defensive appeal.
MID CAP
Stocks that rank between 101 to 250 in terms of market cap belong to the mid cap universe. Though the segment avoided the sharp negative returns seen in small- and micro-caps, their muted performance reflects a phase of consolidation due to valuation headwinds and a more selective market environment.
SMALL CAP
These are stocks ranked 251 onwards in terms of market cap. The segment entered a correction phase as stretched valuations, slower earnings growth, and reduced risk appetite weighed on returns. While the drawdown was less severe than in microcaps, the negative performance underscores the segment’s vulnerability during periods of market consolidation.
MICRO CAP
The microcap index, comprising the top 250 companies beyond the Nifty 500 constituents, emerged as the weakest performer in 2025, ranking at the bottom among all segments. The performance was weighed down by sharp valuation corrections, reduced liquidity, heightened risk aversion and significant profit-booking in the speculative stocks.
Long-term performance
Microcaps have delivered the strongest long-term returns, though this compounding power comes with pronounced volatility. The segment has suffered the steepest drawdowns in years such as 2018, 2019, and 2025, with performance highly dependent on liquidity, investor sentiment, and earnings visibility.
Midcaps have provided a more balanced outcome—capturing upside in bull markets while showing greater resilience than smaller peers during downturns. Small caps, by contrast, remain prone to sharp cyclical swings.
Large caps have generated the lowest long-term returns but offered stability and capital preservation, consistently outperforming during stress periods and consolidation phases, serving as anchors in diversified portfolios.
Calendar year returns calculated using closing values between the first and last trading day. The 10-year return is the compounded average return. Indices considered: Large-cap: Nifty-50 TRI, Midcap: Nifty Midcap 150 – TRI, Microcap: Nifty Microcap 250 – TRI, Smallcap: Nifty Smallcap 250 – TRI. Source: ACE MF.
