Small-Cap Funds Defy Underperformance: Retail Inflows Soar Despite 2025 Dip

• Small-cap mutual funds attract robust retail inflows despite a nearly 5% average decline in 2025.
• November saw a 27% jump in small-cap fund inflows to ₹4,406 crore, even as the Nifty Smallcap 250 – TRI index corrected by 3.3%.
• Experts like Navy Vijay Ramavat attribute continued investor confidence to a disciplined long-term approach and easing valuation pressures.
• Investors with a higher risk appetite are comfortable with short-term volatility, anticipating future gains as earnings de-rating bottoms out.
• Advisories include focusing on long-term wealth creation via SIPs, diversification across fund types, and strategic rebalancing.

Why It Matters: Retail investors show strong long-term confidence in small-cap funds despite short-term underperformance.