Wealth Company Small Cap Fund NFO: Strong potential in small size

The Wealth Company Mutual Fund is launching the Wealth Company Small Cap Fund on 5^th March 2026. Small Cap funds are the companies ranked 251^st and beyond in terms of full market capitalization. In this article we will review the NFO and understand how small caps may boost returns from your investment portfolio.

Why should you invest in Small Caps?

• Growth Potential: Many large company once started small. Stocks that are small cap today can become midcap and large cap stocks tomorrow.
  
  

  

  For illustration and understanding purposes only



• Diversification across more themes compared to other market caps: Small caps may provide richer diversification to your investment portfolio by exposure to industries that are underrepresented or absent in the Nifty 50 - such as Healthcare, Chemicals, Capital Goods and Textiles. This provides access to emerging business models and niche growth themes beyond traditional large-cap sectors.


• Built for Long Term Investment Horizon: Aim for Long term wealth creation. Risk, volatility & drawdown may reduce with longer holding periods.


• Wider industry representation, greater opportunity: India's evolving growth trajectory is driving sectoral shifts in GVA, opening emerging opportunities across small caps. The contribution of manufacturing is expected to outgrow services and agriculture and increase its share in overall GDP.
  
  

  

  Source: IMF | World Economic Outlook Growth Projections; data.gov.in; PHDCCI, Viksit Bharat @ 2047 For illustration and understanding purpose only. Past performance may or may not be sustained in future. The above graph/stock/sector is used to explain the concept and is for illustration purpose only and should not used for development or implementation of an investment strategy. The information herein is based on expectations and the actual results could vary materially. This is not indicating returns from any investments. There is no assurance as regards to performance of any company, sector or investment



• Long term wealth creation potential: Small caps are generally suited for long term wealth creation. Small caps historically have long term return potential, albeit with reasonable rise in volatility. However, risk, volatility & drawdown has been seen to reduce with longer holding periods. Occurrences of higher returns (>15% & 20%) on a daily rolling basis is significantly higher for Small Cap Index in various time buckets (as shown in chart below). Occurrences of negative returns reduces to almost zero if the holding period is above 5 yrs. The chart below shows percentage of times daily rolling returns were positive (>15%, >20%) and negative across different holding.
  
  

  

  Source: Advisorkhoj Research, Period 01.04.2025 to 28.02.2025. Past performance may or may not sustain in future. These figures pertain to performance of index and do not any manner indicate returns/ performance of the scheme. One cannot invest in index directly



• Wealth Creation Opportunity: The chart below shows the growth of Rs 10,000 investment in Nifty Small Cap 250 TRI versus other broad market indices over the last 10 years (ending 16^th February 2026). You can see that the wealth creation by Nifty Small Cap 250 TRI was significantly higher than large cap (Nifty 100 TRI) and broad market index (Nifty 500 TRI)
  
  

  

  Source: National Stock Exchange, data as on 28^th February 2026. Disclaimer: Past performance may or may not be sustained in the future



• Potential to outperform in bull market phases: Despite forming the largest segment of the market, small-cap companies are often under-researched, leaving significant opportunity for active investors. The chart below, shows calendar year returns of Nifty 100 (large cap), Nifty Midcap 150 (Midcap) and Nifty Small Cap 250 indices. The small cap index outperformed the large and midcap indices, 7 times in the last 12 years.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research, data as on 31^st December 2025. Large caps are represented by Nifty 100 TRI, Midcaps by Nifty Midcap 150 TRI and Small Caps by Nifty Small Cap 250 TRI. Disclaimer: Past performance may or may not be sustained in the future

Small cap funds in current market scenario

The market has rebounded after India and US agreed on a Trade Deal which reduced tariffs on Indian exports to the US from 50% to 18%. The macros of Indian economy are strong with robust GDP growth, narrowing fiscal deficit, stable inflation and revival in consumption demand. Hence, the sharp correction in small cap stocks has moderated valuations in this space creating attractive investment opportunities for investors in small caps. Investing in small caps may be suitable in current market scenario since:-

• The time and breadth readings show that recent correction may be in the process of bottoming out. Breadth readings are at historical lows. Currently, 67% of the stocks have fallen more than 20% from their highs. This has happened just 4 times in the last 16 years. Time-wise correction also seems to be nearing end. On going correction is more than 355 days. The average duration of >10% corrections historically is ~300 days
  
  

  

  Source: Bloomberg. For illustration and understanding purpose only. Data as on 25^th February 2026. Source. Past performance may or may not sustain in future.



• Small Caps Performance After > 10% & > 20% Decline 7 out of seven times in the last two decades, the index has ended higher five years later, after suffering a > 20% drop.
  
  

  

  Source: Bloomberg. For illustration and understanding purpose only. Data as on 19^th February 2026. Past performance may or may not sustain in future.

The Wealth Company Small Cap Fund NFO

The Wealth Company Small Cap Fund is positioned as a scheme that invests in small cap stocks using a unique Dual-Engine Portfolio of Leaders and Challengers. The fund aim for a structured portfolio that may balance resilient leaders with high-potential challengers, and a process of stock selection backed by the AMC's expertise.

The above is the framework currently adopted by the Scheme and is subject to change in accordance with the provisions of the SID & depending on the market conditions

Investment process

Stock selection: CHANGE and EDGE framework

1. CHANGE is a disciplined framework employed by the fund managers to identify scalable, resilient and high-quality businesses where each letter of the acronym stands for:
   
   

   

   The above is the framework currently adopted by the Scheme and is subject to change in accordance with the provisions of the SID & depending on the market conditions

Framework for stock-selection: EDGE

The fund managers also employ EDGE- a multi-dimensional lens to assess market direction and positioning.

Portfolio will be managed as per stated Investment objective, investment strategy & asset allocation in the Scheme Information Document (SID) and is subject to the changes within provisions of SID of the Scheme. The above is the framework currently adopted by the Scheme and is subject to change in accordance with the provisions of the SID & depending on the market conditions

Who should invest in The Wealth Company Small Cap Fund NFO?

The fund is suitable for investors who:

1. Wish to invest in the small cap space trading below intrinsic value.


2. Want a diverse portfolio investing across sectors


3. Are looking to build wealth over the long term by investing in the upcoming market leaders.


4. Are having high-risk appetite seeking long-term capital appreciation, who are comfortable with higher volatility and have a long-term investment horizon.

Consult your financial advisor or mutual fund distributor to understand how Wealth Company Small Cap Fund NFO can be suitable for your long-term investment goals.

Disclaimer