For many investors, small-caps are the hunting ground for the next big story. They promise undiscovered gems, early entry before institutions arrive, and the thrill of catching a multibagger before it becomes mainstream. That allure has drawn waves of retail money into the segment over the years. But the reality is far more sobering. Small cap stocks, despite the craze, rarely graduate into bigger market buckets.
A bl.portfolio study shows that only 34 of the 4,012 names in AMFI’s December 2017 list had climbed into the mid- or large-cap categories by June 2025. That is a graduation rate of just 0.8 per cent. The data undercuts the notion that small-cap bets routinely grow into heavyweights.
How we did it
Since December 2017, mutual fund industry body AMFI has been releasing semi-annual rankings of stocks based on their six-month average market capitalisation. Under this system, the top 100 are classified as large-caps, the next 150 as mid-caps, and 251st onward as small-caps. We studied 4,262 companies from December 2017 that were matched with the current list using ISIN number (Changes in ISINs during those periods too were accounted). The complete datasets contain 4,991 and 5,158 companies in the December 2017 and June 2025 lists, respectively. Of these, 4,012 were classified as small-caps in December 2017 — our base universe.
Who made it up
Of the 34 small-cap stocks that managed to climb higher, only CG Power and Industrial Solutions broke into the large-cap bucket. The other 33 were reclassified as mid-caps. Names in this list include L&T Technology, Suzlon , Escorts Kubota, Phoenix Mills, UNO Minda, Fortis Healthcare and BSE. Not all upgrades lasted. Some names advanced for a time but slipped back. Carborundum Universal, for example, graduated to mid-cap in June 2023 but returned to small-cap status in June 2024.
Why so few
The hurdles are structural. Small-caps usually face high volatility, thin resources and fragile business models. Unlike mid- and large-caps with comparatively diversified revenue streams, stronger governance and market depth, small-caps are often niche or early-stage. Many depend on cyclical demand, a single product line or limited capital access. All these factors can cap their ability to scale.
The bar itself has also risen. The mid-cap cut-off (market-cap of the 250th company) rose from ₹8,580 crore in December 2017 to ₹30,404 crore in June 2025. Yet, even with this surge, the odds of upward mobility remained slim.
What it takes
For retail investors, the contrast between perception and reality is stark. Small-caps are often marketed as the nursery of future giants, but the data show most never make that leap. The few that succeed typically benefit from fortuitous sector cycles, timely access to capital or a strong promoter push. For every Suzlon or UNO Minda that climbed, there are hundreds that stayed stuck in obscurity. That imbalance highlights a central truth: the small-cap label promises excitement, but it rarely delivers scale.
Investor takeaway
To make it big sustainably, companies need steady earnings growth, supportive sectoral winds and management capable of steering through cycles. Just as important is access to growth capital. The handful of small-caps that did move up likely shared these traits. For investors, the message is clear: Small-cap bets need sharper filters. Instead of spreading thin across dozens of names, the focus has to be deeper. The 0.8 per cent graduation rate shows small-cap success is neither easy nor automatic. It calls for selectivity, patience and a disciplined approach to risk.
Published on September 20, 2025