Small-cap stocks are gaining traction among investors in 2025, thanks to their high growth potential and ability to diversify portfolios. These companies, typically with a market capitalization below ₹5,000 crore, offer opportunities for significant returns, albeit with higher volatility. Mutual funds, guided by expert fund managers, have been actively investing in small-cap stocks to capitalize on their long-term growth prospects. In this article, we explore the most held small-cap stocks by mutual fund schemes in 2025, providing insights into why these companies are favored and what they mean for investors.
Why Invest in Small-Cap Stocks?
Small-cap stocks are known for their potential to deliver substantial returns, especially for investors with a high-risk appetite and a long-term investment horizon. These companies often operate in niche markets or emerging sectors, allowing them to grow rapidly when conditions are favorable. However, their volatility requires careful analysis of fundamentals, management quality, and market trends. Mutual funds, with their rigorous stock selection processes, provide a reliable way to identify promising small-cap stocks.
Here’s a look at the top 10 small-cap stocks most held by mutual fund schemes in 2025, based on recent data from various sources.
Most Held Small-Cap Stocks by Mutual Funds in 2025
1. Jaiprakash Power Ventures (21 Schemes)
Jaiprakash Power Ventures leads the list, held by 21 mutual fund schemes. This power generation company has been a favorite due to its strategic focus on renewable energy and infrastructure development. With India’s increasing demand for clean energy, Jaiprakash Power’s projects in hydroelectric and thermal power make it a compelling choice for mutual funds seeking exposure to the energy sector.
Key Highlights:
Strong presence in the power sector, aligning with India’s renewable energy goals.
Attractive valuations for long-term investors.
High growth potential in a rapidly evolving industry.
2. Gabriel India (19 Schemes)
Gabriel India, a leading automotive component manufacturer, is held by 19 mutual fund schemes. The company’s expertise in suspension systems and its partnerships with major automakers position it well in India’s growing automotive market. As electric vehicles (EVs) gain traction, Gabriel India’s innovation in lightweight components makes it a standout.
Key Highlights:
Beneficiary of the booming automotive and EV sectors.
Strong financial health with consistent revenue growth.
Trusted supplier to global and domestic automakers.
3. Anand Rathi Wealth (18 Schemes)
Anand Rathi Wealth, a wealth management and financial services firm, is a favorite among 18 mutual fund schemes. Its focus on high-net-worth individuals and robust financial advisory services has driven steady growth. The company’s ability to navigate market volatility makes it a stable small-cap pick.
Key Highlights:
Growing demand for wealth management services in India.
Strong client base and diversified revenue streams.
High return on capital employed (ROCE), appealing to fund managers.
4. VIP Industries (17 Schemes)
VIP Industries, India’s leading luggage and travel accessories brand, is held by 17 mutual fund schemes. The company benefits from the resurgence of travel and tourism post-pandemic, coupled with its strong brand presence and innovative product offerings.
Key Highlights:
Dominant player in the organized luggage market.
Expanding product portfolio to cater to evolving consumer preferences.
Strong distribution network and brand loyalty.
5. Apar Industries (16 Schemes)
Apar Industries, a leader in conductors and specialty oils, is held by 16 mutual fund schemes. Its critical role in the power transmission and distribution sector, along with its growing export markets, makes it a top pick for funds seeking exposure to infrastructure and energy.
Key Highlights:
Key supplier in India’s power and renewable energy infrastructure.
Expanding global footprint with high-quality products.
Consistent financial performance and strong fundamentals.
6. Sandhar Technologies (15 Schemes)
Sandhar Technologies, an automotive component supplier, is held by 15 mutual fund schemes. Its focus on safety and security systems for vehicles, along with its partnerships with leading automakers, positions it for growth in the automotive sector.
Key Highlights:
Diversified product portfolio catering to two-wheelers and four-wheelers.
Strong R&D capabilities driving innovation.
Beneficiary of India’s automotive industry growth.
7. Texmaco Rail & Engineering (14 Schemes)
Texmaco Rail, a key player in railway infrastructure and rolling stock manufacturing, is held by 14 mutual fund schemes. With Indian Railways modernizing and expanding, Texmaco is well-positioned to benefit from increased government spending on rail infrastructure.
Key Highlights:
Strong order book from Indian Railways and private players.
Diversified operations in rail and infrastructure sectors.
High growth potential driven by government initiatives.
8. NLC India (14 Schemes)
NLC India, a public-sector enterprise in lignite mining and power generation, is held by 14 mutual fund schemes. Its focus on renewable energy and expansion into solar and wind power aligns with India’s sustainability goals.
Key Highlights:
Strategic shift towards renewable energy sources.
Stable revenue from government-backed projects.
Attractive dividend yield for income-focused investors.
9. Time Technoplast (13 Schemes)
Time Technoplast, a leader in polymer-based packaging and industrial solutions, is held by 13 mutual fund schemes. Its innovative products and growing presence in sectors like agriculture and automotive make it a compelling small-cap choice.
Key Highlights:
Strong demand for sustainable packaging solutions.
Diversified product offerings across multiple industries.
Robust financial performance and export potential.
10. Stylam Industries (12 Schemes)
Stylam Industries, a manufacturer of decorative laminates, is held by 12 mutual fund schemes. Its leadership in the premium laminates market and growing export business make it a favorite among funds seeking exposure to the home décor and construction sectors.
Key Highlights:
Strong brand presence in domestic and international markets.
Beneficiary of India’s real estate and construction boom.
Consistent revenue growth and high-profit margins.
Why Mutual Funds Are Betting on These Small-Cap Stocks
Mutual funds are drawn to these small-cap stocks due to their strong fundamentals, growth potential, and alignment with emerging trends in India’s economy. Key factors driving their popularity include:
High Growth Potential: Small-cap stocks like Texmaco Rail and NLC India are tied to government-backed infrastructure and energy initiatives, which are expected to drive significant growth.
Sectoral Tailwinds: Companies like Gabriel India and Sandhar Technologies benefit from the automotive sector’s shift towards electric vehicles and advanced technologies.
Diversification: Stocks like Anand Rathi Wealth and VIP Industries offer exposure to diverse sectors like financial services and consumer goods, reducing portfolio risk.
Innovation and Market Leadership: Companies such as Apar Industries and Stylam Industries lead in niche markets, offering innovative products with strong demand.
Risks and Considerations for Small-Cap Investing
While small-cap stocks offer high return potential, they come with inherent risks. Investors should consider the following before investing:
Volatility: Small-cap stocks are more susceptible to market fluctuations, requiring a high-risk tolerance.
Liquidity Risks: Some small-cap stocks may have lower trading volumes, impacting ease of buying or selling.
Fundamentals Matter: Thorough research into a company’s financial health, management quality, and industry trends is crucial.
Long-Term Horizon: Small-cap investments often require a longer time frame to realize their full potential.
Consulting a financial advisor and conducting due diligence is essential before investing in small-cap stocks or mutual funds.
How to Invest in Small-Cap Stocks
Investors can gain exposure to these small-cap stocks through:
Direct Stock Purchases: Buy individual stocks like Jaiprakash Power or Gabriel India through a demat account.
Small-Cap Mutual Funds: Invest in funds like Bandhan Small Cap Fund or Nippon India Small Cap Fund, which hold many of these stocks.
Exchange-Traded Funds (ETFs): Opt for ETFs tracking indices like the NIFTY Smallcap 250 for diversified exposure.
Smallcase Portfolios: Professionally managed portfolios like those offered by smallcase provide curated small-cap stock baskets.
Always review scheme-related documents and assess your risk tolerance before investing.
Conclusion
The most held small-cap stocks by mutual funds in 2025, including Jaiprakash Power Ventures, Gabriel India, and Anand Rathi Wealth, reflect the confidence of fund managers in their growth potential. These companies span diverse sectors like energy, automotive, financial services, and consumer goods, offering investors opportunities to capitalize on India’s economic growth. While small-cap stocks carry higher risks, their potential for significant returns makes them attractive for long-term investors. Conduct thorough research or consult a financial advisor to align these investments with your financial goals.
Disclaimer: Investments in securities markets are subject to market risks. Read all scheme-related documents carefully before investing.
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