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Business Standard
|August 27, 2025
The Securities and Exchange Board of India (Sebi) chairman, Tuhin Kanta Pandey, recently cautioned mutual funds against investing heavily in microcap companies, citing liquidity constraints and volatility.
The Securities and Exchange Board of India (Sebi) chairman, Tuhin Kanta Pandey, recently cautioned mutual funds against investing heavily in microcap companies, citing liquidity constraints and volatility. Retail investors who invest directly in these stocks or indirectly through mutual funds (MFs) need to be mindful of the associated risks. Microcaps are firms ranked beyond the top 500 by market cap.
High return potential Microcaps offer early-stage growth opportunities. "If the business model scales up, wealth creation can be significant as today's microcaps become tomorrow's midcaps," says Shrikant Chouhan, head of equity research, Kotak Securities.
"A successful new product, expansion into new markets, or a strategic partnership can lead to rapid growth and significant returns," says Devarsh Vakil, head of Prime Research, HDFC Securities. Over the long run, microcaps have delivered strong performance.
This story is from the August 27, 2025 edition of Business Standard.
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