Nifty Small Cap 250 index: While betting on smallcaps, don’t forget about the quality

Synopsis

The smallcap stocks have been under pressure over the past month after the market regulator warned about the frothy valuations in the segment. During the period, the smallcap quality index was still able to beat the broader smallcap index by 77 basis points vindicating the historical trend that the market continues to reward high-quality companies.

ET Intelligence Group: Some good news for investors who are lured by the potential of smallcap stocks to deliver hefty returns but are worried about the high risk associated with such bets. Historical data suggests that quality matters even in the case of smallcap selection. The Nifty Small Cap 250 Momentum Quality 100 index — a smallcap index where constituents are selected based on momentum and quality — has gained 25.4% annually over the past

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