What is the Nifty Smallcap 100 Index: Constituent Stocks, Sectors and Returns?

Nifty Smallcap 100 Index can be defined as a diversified index consisting of 100 small cap stocks listed on the National Stock Exchange (NSE). These 100 stocks are the companies ranked from 251st to 350th position on the basis of their free-float market capitalisation.

This means that these 100 small cap stocks are a subset of the larger Nifty Smallcap 250 Index, this index is often used as an indicator of the performance of small market cap companies. Additionally, the Nifty Small-cap 100 Index also acts as benchmark for a number of mutual funds and exchange traded funds (ETFs) that primarily invest in domestic small capitalization companies.

The Nifty Smallcap 100 Index includes all of the 50 stocks that are part of the smaller Nifty Smallcap 50 Index. The remaining 50 stocks are selected from the Nifty Smallcap 250 Index based on the average daily turnover using the full market capitalisation method. In effect, the 100 listed stocks that are part of this index have the largest market cap in the small cap category.

Some pointers regarding stock selection process for the Nifty Smallcap 100 Index are:

• Rank of individual stocks is based on the average daily turnover over a 6-month period.
• Selection takes place based on full market capitalisation of companies included in Nifty Smallcap 250 Index
• Constituent stocks of the Nifty Smallcap 50 Index are also included in this index.

Key exclusion criteria for small cap stocks in the case of this index are:

• Constituent stocks that are not part of the Nifty Smallcap 250 Index or are not listed on the NSE
• If the full market cap mediated rank of the stock falls below 180th even if the company is part of the Nifty Smallcap 250 Index
• Rank based on full market cap is higher than top 180 firms featured on Nifty Smallcap 250 Index, but the rank on average daily turnover of the stock is lower the 130th position

The index is rebalanced every six months on the dates of January 31 and July 31 of each year, i.e., the average data for the six months ending on the cut-off date is used for the semi-annual evaluation of indices. At the time of Nifty Smallcap 250 Index rebalancing, existing stocks may be moved out and new smallcap stocks may be moved into the index.

The Nifty Smallcap 100 Index features a total of 100 small capitalization companies, however, not all these companies enjoy an equal weightage on the index. The below table lists the 10 stocks featuring the highest weightage on index as on 30th September 2023:

The Nifty Small-cap 100 Index is well-diversified in terms of the number of different sectors is represents. As of September 30, 2023 the sectoral representation of this index was as shown in the below table:

One of the key factors to consider while investing in smallcap stocks is that they can to be extremely volatile over the short term. This is primarily because the small size of these companies makes them quite susceptible to changing market conditions, government regulation changes and even inflationary impact on raw material prices.

However, the long-term growth potential of these stocks is significant as they have the potential to show long-term growth and emerge as a future market-leader in their segment. This is illustrated by the historic returns data of this index shown in the below table over the 1 year and 5 year periods as well as since inception as of 30th September 2023: