Are Indian Small-Caps in a Bubble Territory?
If the past seven years were a movie, India’s small-cap stocks played the hero who suddenly shot to fame.
Past 7 Years
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Between 2017 and end-2024, small-cap companies in India saw their total market value jump from ₹17 lakh crore to ₹92 lakh crore a nearly 5× increase. That’s a blockbuster annual rise of 27%, faster than both mid-caps and large-caps.
In 2025: Script has changed.
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The benchmark small-cap index Nifty Smallcap 100 took a sharp hit, with 89% constituent stocks down between 20% and 60%. Many investors who entered during the excitement of late 2024 felt the sting of sudden volatility.
Why It Looks Like a Bubble
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Valuations vs. Reality: The steep rise in stock prices was not always matched by equal growth in profits or business performance. This disconnect often signals overvaluation.
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High volatility & liquidity risk: Smallcap stocks tend to swing harder in bad times, losses amplify. When many investors rush to sell, prices fall steeply.
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Hype-driven investment: The fast returns attracted many retail investors chasing short-term gains rather than focusing on fundamentals. That behavior fuels bubbles.
Still, this isn’t a doom story.
Small-caps can still be valuable — but only for patient investors who can handle swings. The smartest way to approach them is simple:
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Think long term (5–7 years+ if not more),
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Prefer SIPs over lumpsum,
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Keep exposure limited, and
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Stay diversified with large-caps and debt.
Yes, parts of India’s small-cap market look overheated now, and 2025 has hit many small-caps hard. But for patient and careful investors, small-caps can still play a role if you understand and are ready for the risk.
(Contributed by Aman Goyal, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)
From Petrol Pumps to Portfolios
Major Arjun served 18 years in the Indian Army—calm, disciplined in routine, and always prepared for the unexpected- that was his training.
But one thing he never thought much about? Oil prices.
For him, petrol was simply something he filled before long drives or when his car tank wanted fuel.
Until one month, everything changed. Oil prices spiked. 
His fuel bill rose… and so did the cost of almost everything else—groceries, school transport, vegetables, even weekend biryani. His once-perfect monthly budget suddenly felt stretched.
A bigger shock came next, a message from his bank:
“Your home loan EMI has increased due to a rise in interest rates.”
Finally, he contacted a good financial planner who connected the dots:
Higher crude oil → Higher inflation → RBI rate hikes → Higher EMIs.
The impact didn’t end there.
When reviewing his investments, Arjun noticed some funds—especially aviation, logistics, and FMCG—had dipped.
His planner now explained, “Sir, when fuel gets costlier, company profits shrink. And that affects your portfolio.”
The Turning Point
Arjun sat with his planner with a view to get a sense into his portfolio, The planner recommended him to diversify his investments:
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Funds less sensitive to crude oil
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Balanced asset allocation
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Mix of equity, debt, and international exposure
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A solid emergency reserve
Now, when oil prices swing, his portfolio stays stable—just like his nerves on the battlefield.
Final Lesson learnt by Major Arjun:
“In the Army, we prepare for enemies we cannot see.
In my personal portfolio, oil proved to be one of those invisible enemies.”
(Contributed by Prerna Pattanayak, Relationship Manager, Team Sukhoi, Hum Fauji Initiatives)
The Sliding Rupee: A Silent Threat to India’s Growth Story
When the Indian Rupee slipped past ₹90 per US dollar this month, it instantly became a talking point. It wasn’t just another market headline—it made people wonder what’s really going on with the economy and whether this would affect their day-to-day life.
Surprisingly, India’s overall economic indicators still look steady: growth is strong, inflation is manageable, and our foreign-exchange reserves remain healthy. So, what pushed the rupee down?
A major reason is that foreign investors have slowed their investments in India. Here’s the simple version:
FPI (Foreign Portfolio Investment): Money that foreign investors put into our stock market and debt market. Very quick to come and quick to go.
FDI (Foreign Direct Investment): Long-term investment, like foreign companies setting up factories or offices in India.
Both of these have reduced in 2025, meaning fewer dollars are coming into the country.
Meanwhile, the demand for dollars is rising because oil companies, import-heavy businesses, and firms repaying foreign loans all need to buy dollars. Naturally, when demand rises and supply falls, the price of US Dollar goes up Vs Rupee.
Higher global interest rates and expensive imports—fuel, electronics, metals—add more pressure.
But here’s the positive side:
India’s long-term growth story remains intact. A weaker rupee often boosts exports, attracts long-term investors looking for value, and encourages global companies to shift manufacturing to India. These trends can strengthen the economy over time.
The ₹90 mark is a reminder to stay aware, not anxious—and to make financial decisions with clarity, not fear.
(Contributed by Avantika Agarwal, Financial Planner, Team Sukhoi, Hum Fauji Initiatives)
What did our clients ask us in the last 7 days
Question –
I purchased a health insurance policy for my daughter while she was in India. She has now moved abroad for her studies and future plans, and I am unsure when and whether she will return. Should I continue paying the premiums and keep the policy active?
Our Reply –
When a child moves abroad for studies or work, many parents wonder whether they should continue paying for their Indian health insurance. The answer isn’t always straightforward but understanding a few key points will help you take a smart, future-proof decision.
Most Indian health insurance plans cover treatment only within India, so the policy won’t help with medical expenses abroad. Your daughter will need a local health insurance plan in the country where she now lives — something universities and employers generally require there.
But the real value in keeping the Indian policy active lies in future protection.
If she returns to India, even after several years, or is visiting India, maintaining her policy means:
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No waiting periods for pre-existing conditions
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No medical tests to restart coverage
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Lower premiums than buying a new policy later
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Coverage during short trips to India
If the policy lapses, she may face higher costs and delays when reapplying. However, if she plans to settle abroad permanently, keeping the policy may not add much value.
For many families, the practical choice is to continue the policy for a few years until the long-term plans are clearer. It keeps options open and offers peace of mind.
(Contributed by Team Sukhoi, Hum Fauji Initiatives)
