Retail-Heavy Small-Caps Fall as Much as 57% in 1 Year

Small-Cap stocks with a higher proportion of retail investor ownership have significantly underperformed those with greater Mutual Fund ownership over the past year, according to a study of small-cap companies based on Bloomberg data and newspaper analysis.

Among the 10 small-cap stocks with the highest retail ownership, nine recorded negative returns over the past year, with declines ranging from 8.8 per cent to 57 per cent. Only one stock gained, rising 7.3 per cent. The analysis considered retail investors’ investments of up to Rs 1 lakh per company.

Several widely held stocks witnessed sharp corrections despite having previously attracted substantial retail participation. Reliance Power recorded the steepest decline among the selected companies, falling 56.8 per cent over the year. Zee Entertainment Enterprises declined 35.5 per cent, while Olectra Greentech fell 30.1 per cent. Indian Energy Exchange declined 27.5 per cent, while Central Depository Services (India) Ltd. recorded a relatively smaller decline of 16.1 per cent.

The performance was notably different among small-cap companies with higher mutual fund ownership. Of the 10 small-cap stocks with the largest mutual fund shareholding, six recorded positive returns over the same period. Their gains ranged from 10.3 per cent to about 89 per cent, while the remaining four stocks declined between 2 per cent and 28 per cent.

Sona BLW Precision Forgings delivered the strongest performance among the selected mutual fund-heavy stocks, rising 89.2 per cent over one year. City Union Bank gained 40.8 per cent, while Kalpataru Projects International rose 10.3 per cent. On the other hand, Crompton Greaves Consumer Electricals declined 28.4 per cent and Delhivery fell 8.6 per cent.

The comparison, however, does not suggest that higher mutual fund ownership guarantees positive returns. Several stocks in the mutual fund-heavy category also recorded losses, highlighting that ownership patterns alone do not determine stock performance.

The study also identified a notable trend in which retail participation increased after substantial stock price appreciation. Central Depository Services (India) Ltd. shares gained approximately 125 per cent between October 5, 2023, and October 5, 2025, before declining around 16 per cent over the following year. During this period, retail shareholding in the company increased from 39.16 per cent in June 2023 to 52.19 per cent in June 2026.

A similar pattern was observed in Amara Raja Energy & Mobility. The stock gained approximately 56 per cent between October 2023 and October 2025 before correcting nearly 26 per cent over the subsequent year. Its retail shareholding increased from 19.29 per cent in June 2023 to 27.52 per cent in June 2026.

These examples indicate that rising retail ownership can coincide with periods following substantial stock market rallies. However, the data does not establish that an increase in retail ownership caused the subsequent decline in stock prices.

Source: Bloomberg data, newspaper analysis, October 2026.

Disclaimer: The article is for informational purposes only and not investment advice.