SIF-Equity (Ex Top 100): A Structured Mid-Small Cap Strategy

India’s equity markets have expanded beyond the familiar territory of the top 100 listed companies. While large-cap stocks offer stability, a significant portion of India’s growth story now lies in mid- and small-cap companies that are earlier in their life-cycle, closer to emerging sectors and more responsive to shifts in the domestic economy. Accessing this broader equity universe, however, requires a different investment mindset, one that recognises opportunity and risk. This is where Specialised Investment Funds (SIFs) offer investors a smart way to access promising mid- and small-cap companies, backed by expert guidance and flexibility to benefit from India’s growing economy.

SEBI recently introduced SIFs to fill a gap in India’s investment options. SIFs  have a minimum ticket size of Rs 10 lakh and offer a middle path between mutual funds and more advanced investment plans (such as PMS and AIF) with higher investment thresholds, giving investors more flexibility while staying regulated. Investors can also contribute and add regularly through systematic investment plans (SIPs), which help build wealth steadily. This makes it easier for people to explore a wider range of stocks and strategies safely.

Equity Ex-top 100 long-short fund invests a minimum 65% of the money in equity and equity-related instruments of companies, excluding the top 100 companies by market capitalisation and primarily comprises mid- and small-cap stocks. These companies can grow faster than large caps when the economy is doing well, but their prices can fall more sharply during downturns. This makes them both exciting and risky. A purely passive or directional approach can leave investors exposed to market swings and emotional decisions, especially during volatile phases.

Historical data shows that volatility is not an exception in the mid- and small-cap segment, it is a defining feature. As participation in this segment has increased and liquidity has improved, price discovery has become more efficient, but sentiment-driven swings remain common. Investor behaviour often amplifies these movements, with buying driven by optimism near market peaks and selling driven by fear during corrections. Without a structured approach, these cycles can erode long-term returns.

This is where strategy becomes central to SIF-Equity (Ex-Top 100) investing. Instead of just betting on rising markets, these strategies mix long positions in strong companies with limited short positions or hedging techniques. The goal is not to eliminate risk, but to manage it more effectively by cushioning downside moves and reducing portfolio volatility across market cycles. In short, it aims to capture growth while staying more in control during uncertain times.

Building a portfolio with these strategies focuses on spreading risk and staying flexible. Investments can shift between stocks, derivatives and even safer cash-like instruments depending on market conditions. Stocks are usually chosen based on strong fundamentals like solid balance sheets, clear earnings growth, competitive advantage and reasonable valuations, rather than short-term market trends.

Derivatives, often misunderstood as risky, are used judiciously in these strategies. They help protect the portfolio, balance positions or generate extra income. Their use shows how India’s equity markets, especially outside the top-100 companies, have become more developed and liquid.

In markets driven by emotion, SIFs offer a sensible option worth considering for those with a medium to long-term horizon. As India’s markets evolve, such structured approaches reflect a shift towards investing that prioritises both returns and risk awareness.