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Instead of making retail investors richer, the small-cap rally may have left them nursing losses, while mutual funds weathered the choppy market better, according to a Mint analysis. Small-cap stocks with the highest retail shareholding have performed poorly compared with those with the highest mutual fund shareholding, showed the analysis. Out of the top 10 small-cap stocks with the highest retail shareholding, nine have given negative returns over the past year. Their losses range from 8.8% to 57%. The only stock to gain rose just 7.3%. However, the performance was much better among small-cap stocks with the highest mutual fund ownership. Six of the top 10 stocks delivered positive returns, with gains ranging from 10.3% to 89%. The four stocks declined by between 2% to 28%. For the analysis, we selected stocks in which retail investors have invested up to ₹1 lakh per company. Performance chasing When returns are hard to come by across the market, retail investors tend to chase what is still shining—and right now, that means smallcaps. The rush into the segment, when the Nifty 50 returns remain muted, is a classic case of performance chasing. Many of the stocks that now have a high retail shareholding once had very low retail participation. In several cases, the stocks had already delivered a strong rally before retail ownership surged. Retail investors came in after the gains were visible, not before, and found themselves holding the stock after the momentum had faded, and, in many cases, sitting on losses. “Retail investors get into stocks when the momentum is strong, and then they get stuck, especially because they are sort of guided by momentum and impulsive buying,” said Dhananjay Sinha, chief executive and co-head of Institutional Equities. “There is a sort of cyclical engulfment of retail investors into the rally, and that drives up valuation, drives up returns, and more flows come in. As a result, when the tide turns, they get stuck,” he said. For example, Central Depository Services (India) Ltd (CDSL) gained 125% between 5 October 2023 and 5 October 2025 before falling 16% in the past year. But its retail shareholding surged from 39.16% as of June 2023 to 52.19% as of June 2026, indicating that retail investors jumped in much later. Among stocks with high retail ownership, CDSL had the highest retail holding at 52.19% as of June-end. Even Amara Raja Energy & Mobility gained 56% between 5 October 2023 and 5 October 2025, and then corrected nearly 26%. Its retail shareholding increased from 19.29% in June 2023 to 27.52% as of June 2026. Reliance Power Ltd saw the biggest fall, dropping 57% in the past year. Retail investors held a 30.56% stake in the company as of June-end. Tata Elxsi Ltd was another major loser, falling 42%, with retail investors holding a 29.74% stake. Coming to the mutual fund kitty, Sona BLW Precision Forgings Ltd delivered 89% over the past year. Mutual funds held a 36.68% stake in the company. Karur Vysya Bank Ltd is also up 54%, with mutual funds holding a 32.43% stake. But there were exceptions. Crompton Greaves Consumer Electricals Ltd, which had the highest mutual fund holding at 53.23% among these small-cap stocks, fell 28% over the past year. Since 1 April, the Nifty Smallcap 250 has gained 19.7%, sharply outperforming the Nifty 50, which has fallen 0.55%.
document fetched 2026-10-07 02:57 · canonical https://livemint.com/market/stock-market-news/retail-investors-chased-small-caps-now-they-re-nursing-losses-11791263994165.html