The Bombay Stock Exchange (BSE) is one of the leading stock exchanges in India. It provides several indices that track various market areas. The BSE Small Cap Index, which monitors the performance of small-cap companies listed on the market, is one example of such an index. Everything you need to know about the BSE Small Cap index, including its performance, makeup, and historical patterns, will be discussed in this article.
Composition of the BSE Small Cap Index
The BSE Small-Cap index comprises small-cap companies listed on the BSE. Companies with market capitalizations between Rs. 50 crore and Rs. 5000 crores are included in the index. The index included 734 businesses as of March 2023, accounting for 8.21% of the market capitalization of all the companies listed on the BSE.
The businesses that make up the index are spread across several industries, including consumer products, financial services, healthcare, and technology. To make sure it appropriately reflects the state of the market, the index is reviewed and rebalanced every three months.
Performance of the BSE Small Cap Index
Investors pay particular attention to the performance of the BSE Small Cap index because it offers information on the state of India’s small-cap enterprises. Due to their lack of experience and higher market capitalization, small-cap companies are viewed as riskier than their large-cap competitors.
The benchmark Nifty 50 index, which measures the performance of the top 50 firms listed on the BSE, has historically beaten the BSE Small Cap index. The index, however, has had greater ups and downs in performance over time than the nifty small cap due to its higher volatility.
The BSE Small Cap index’s performance over the past few years has been unpredictable. The index experienced a substantial drop in 2018, returning negatively by 23.37%. Nevertheless, it returned positively in 2019 with a return of 12.03 percent. The index underperformed in 2020, returning a negative 5.02%, while outperformed in 2021, returning a positive 16.22%.
Investing in the BSE Small Cap Index
Exchange-traded funds (ETFs) that track the BSE Small Cap index are available to investors who are interested in investing in the index. Investors can purchase and sell these ETFs exactly like stocks because they are traded on the stock market.
If investors want exposure to Indian small-cap companies, investing in the BSE Small Cap index may be a viable choice. However, it is crucial to remember that small-cap companies might have more unpredictable performance and are generally riskier than large-cap companies. Therefore, when investing in the BSE Small Cap index, investors should be ready for higher levels of risk.
Conclusion
For Indian small-cap companies, the BSE Small Cap index serves as a crucial benchmark. Investors can gain exposure to a variety of industries thanks to the index’s wide variety of businesses from numerous industries. The index has generally performed well, but it also shows greater volatility than the benchmark Nifty 50 index. The BSE Small Cap index is a decent alternative for people who want exposure to Indian small-cap companies, but investors interested in it should be prepared for higher levels of risk.