Retail investors chased small-caps. Now they’re nursing losses

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%.

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.

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.

Srushti Vaidya

Srushti is a markets reporter at Mint. She writes on equity markets, and her areas of coverage range from brokers and exchanges to mutual funds and the fast-evolving alternatives space, including GIFT City, from the financial capital of India. She has an experience of over three years in journalism, and has previously worked at Moneycontrol. She has an undergraduate degree in mass communication and a postgraduate diploma in business and financial journalism from Asian College of Journalism, Chennai.Srushti prefers meeting people from the industry over making calls. Her work aims to drive impact—her story on illegal gold imports, for instance, caught the government’s attention and contributed to a policy shift. She specialises in turning complex market data into clear, engaging stories so even her grandmother could understand futures and options.Outside of the newsroom, she enjoys spending money on jewellery and watching thriller films—especially the kind that keep her awake at night. She spends 1.5 hours a day commuting in Mumbai locals, listening to horror podcasts on her way to work. She’s also very talkative—so reach out only if you have lots of time.