Match limited exposure with long investment horizon for small-caps' safety

Such companies tend to be less resilient than their peers: hold only a couple of funds in them and diversify

One segment of the equity market that has been hit hard in the ongoing downturn is small caps. The Nifty Smallcap 250 Total Return Index (TRI) is down 15.1 per cent year-to-date (YTD). Small-cap mutual funds have, on average, declined 11.1 per cent over the same period.

Among stocks belonging to the Nifty Small-cap 250 Index, while the median performer has declined 33.8 per cent, the worst performer has lost 85.9 per cent value from its 52-week peak.

An intrinsically volatile category

Small-cap stocks, by their very nature, are volatile. Since the free float market cap of these stocks