Should you invest in ICICI Prudential Smallcap 250 Index Fund?

About the fund

NIFTY Smallcap 250 represents the balance 250 companies (companies ranked 251- 500) from NIFTY 500. This index intends to measure the performance of small market capitalisation companies.

Index Methodology

To be included in the index, company must become a part NIFTY 500. It is based on free float market capitalisation. Index is re-balanced semi-annually, i.e. in March & September.

Small Cap Universe: Full of potential

GROWTH PROSPECTS : Small Cap companies tend to have higher growth prospects owing to their smaller size.

DIVERSIFICATION: Higher weightage to sectors under-represented in Large & Mid Cap segments.

FUTURE LEADERS: Many specialized businesses, expected to grow to be the leaders of their sector are part of the index.

ACCESS TO NEW IPOS : Capture newly listed companies and that can be a gate way to access
new opportunities.


Portfolio consist of diverse stocks, covering all major sectors

Year on Year performance

Outperformance to Nifty 50 TRI 6 times over the last decade

ICICI Prudential Nifty Smallcap 250 index captures all the 250 stocks in the smallcap index space. It provides opportunity to invest in companies tend to have higher growth rates, which might come at the cost of higher volatility, with a minimum investment amount of INR 100.

You can invest in the NFO here


If this index is tracking 250 small cap stocks, the relative weightage of each stock will be miniscule. From the data of 10 top stocks, only 7 stocks are above 1%. So can you please, if possible, let me know how will an investor benefit even if 50 stocks out of the universe of 250 become multibagger (after assuming 100 of the stocks would be duds as these are small cap stocks from the very bottom of small cap index) but their weightage is below 1%. Is this not too much diversification. Nifty has 50 stocks and Sensex has 30 stocks, but if you have noticed the difference of 20 stocks does not make Nifty 50 diversified as its weightage are very low.

I have no issues with the concept as it is better to invest in small cap through MF route. People who invest in small cap, I am sure are risk takers and hence a better weightage portfolio would have been ideal. As I said before, if a company becomes a multibagger, I want the results to be shown in my NAV.

I will rather go the active route on small cap where the expertise of fund manager in picking stock is utilised despite the higher expense ratio.

No of stocks with weightage above 1 % = 7
No of stocks with weightage between 0.50 to 0.99 = 65
No of stocks with weightage between 0.25 to 0.49 = 95
No of stocks with weightage between 0.10 to 0.24 = 77
No of stocks with weightage below 0.10 = 6

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Does it mean 4 times Nifty50 TRI performed better. This is very near to flip of coin :slight_smile:
if 3 year and 5 year monthly rolling returns and drawdown charts for comparing both indices are available, say for last 15-20 years, probably it will help us in taking better informed decision

just curious, is this not a promotional post ?
Is it ok to promote these here ? @ShubhS9 @Bhuvan

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I suppose it could be considered promotional but I found it useful and would be ok with such a post. Have been thinking of investing in a small cap index and this is a good place to know such info on new funds being launched.


yes… but its from ICICI_Prudential_AMC account. They are just announcing new product on this forum. I suppose as long as promotion is not done from dummy account, it should be fine.

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Ok. is there any other AMC account here ?

Yes, I agree. 1% weightage is pretty low.
Also what will happen when some AMC introduced a fund like ‘India top 5000 companies index’. The fund will invest in all 5000 Indian companies.
Just wondering, what will happen in this case ?

In my view, if there is a fund covering the entire market, it would only give the comfort of diversification. Whether it will create wealth is a question to be debated as 100% is divided over 5,000 companies and simple arthemetic will show that even if a company becomes multibagger, the contribution will be negligible because of the weightage.

It might optically look good because it covers the entire market, but what benefit it will provide the investor is debatable. Diversification is great, but overdiversification will not create wealth, except that we keep paying commission to the AMC.

With my limited knowledge, I feel, if an investor wish to invest in small cap, it is ideal to pick a active fund as the expertise, specialisation of the fund manager will be of immense help. He can exit and buy a stock where he feels is right based on the fund parameter rather than Index Fund. I am sure all will agree that exit strategy is of paramount importance when it comes to small cap stock, if not exited at the right time, the fund will end up holding illiquid stocks. Hence when investing in small cap, the investor or the fund manager should be super convinced about the stock and should be monitoring the same on regular basis. His ears should be on the ground so that he can exit and get out when needed.

This basic rule will not apply when you invest in small cap index fund as it is passive in nature. The issue gets even worse as this fund invest in 251 to 500 of Nifty 500 i.e smallest of the small. The very reason for an investor to invest in small cap is to capture the multibaggers and get super duper returns instead of the safe nifty 50 index, but with such small weightage what benefits, an investor is going to get is questionable - maybe I am missing a point and Icici Pru can explain.

These are my opinion and I could be wrong.

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