What is Smallcase and How Are They Different From Mutual Funds?

Today’s dynamic Indian economy is no longer in a silo, instead has close correlations with global trends and swings. Just like the market is ever evolving so are the modes of investing in it. With newer demographics joining the market newer ways of investing are needed. Smallcase is just another example of this technology driven investment boom.

As per reports from National Securities Depository Limited (NSDL) and the Central Depository Service (India) Limited (CDSL), the market added over 10.4 million active investors in 2020 alone. This is a staggering figure. With the advent of technology based financial apps and trading platforms, the Indian millennial has taken a deep plunge into the trading waters.

So, the question beckons;  what is smallcase? In the coming few sections, we will try to explain the concept and the workings and help the reader grasp “what is Smallcase” while also comprehending how they differ from Mutual Funds.

What is Smallcase

Smallcase combines two of India’s core skills, finance and technology, and bundles them together to provide a new and innovative way of investing in the market. It provides a technology backed platform to the investors to trade in pre-defined and pre-packaged bundles of stocks, securities, ETFs (exchange traded funds), REITs (real estate investment trusts), etc. These bundles are created based on a specific theme or investment strategy (not very unlike Thematic Mutual Funds, in principle).

Under this platform, an investor can either create their own model investment portfolio, also termed as smallcase, or choose from the several existing ones which are created and managed by SEBI (Securities and Exchange Board of India) registered entities. All one needs to begin investing is a trading account and a demat account.

How They Work

The smallcase platform offers the user the flexibility and convenience of investing online in stocks, securities, ETFs, etc. in either existing smallcase bundles created by authorized SEBI registered entities or, for the more knowledgeable investor, the ability to customize their smallcase package as per the strategy or theme of their liking.

Presently, smallcases are available on 12 of India’s largest brokers. So you can either login using the broker id or create a new account on your own.

The next step is to identify the theme of choice. There exist several categories based on different industry themes or investment strategies or risk appetites, curated specifically to cater to the diverse Indian investor population. Some examples of smallcases are; Rising Rural Demand, Building Smart Cities, Healthcare (propelled by the global pandemic). As you can observe, these are not specific companies or sectors, but an all-encompassing area representing a particular theme which may constitute several stocks with differently assigned weightages. In some cases, the total collection of stocks, included in the bundle, might go as high as up to 50.

Now, once you have decided which option to go with, the order is placed for all stocks included in that basket via the respective brokers. And once the transaction is completed, the shares are transferred to your demat account. Yes, they can be edited, updated, changed anytime.

These smallcase are managed by experienced professional managers in conjunction with market research analysts and backed by market prediction algorithmic tools with the objective of regularly tracking the subscribed to stocks and reallocating weightages as per market performance. Such changes in composition can also be done by the individual in case they prefer to build and manage their own smallcase.

Smallcase vs Mutual Funds

Let us look at some of the prominent differences between smallcase and mutual funds.


Mutual Funds charge an expense ratio on the investment amount to compensate for the Fund Manager and overall investment management expenses. While this varies from different fund houses and types of funds it has been observed that smallcase investment fees are significantly lower thereby providing the investor better returns as compared to mutual funds, since that difference in fees becomes a part of ROI.

Ownership and Flexibility:

This is a much desired feature for the experienced investor, since it allows you to update your smallcase portfolio and add or remove stocks. However, in the case of MFs only the fund manager has the authority to do so.

Lock-in Tenure:

While a certain amount of flexibility exists in MF also based on the category, still there is a minimum lock-in period for which you need to continue holding your investments else pay the penalties. In the case of smallcase there is no such obligation and you can exit anytime.

Convenience and Transparency:

It is rather convenient to invest in either of these tools. Both are technology driven and platform backed making your portfolio easily accessible and monitorable anytime from anywhere. However, you do need to have a trading and demat account to invest in smallcase which is not the case with MFs. Also, the visibility of your stock performance in your portfolio is near run-time for smallcase whereas most MFs declare this once a month.

In Summation

Smallcases are hampers of several stocks and/or ETFs which represent an underlying theme, idea or strategy. They involve assigning different weightages to the constituent stocks and then tracking the theme to maximize the returns for the investor. The new era of investors includes several professionals with less free time on their hands owing to work pressure or other obligations. This is one of the big reasons why smallcases have become very popular lately since an investor can choose from several of the curated bundles already available and then not have to track or monitor the performance regularly. Another appeal is that they are a low cost way of building a diversified portfolio. Finally, the inclusivity is very high on this platform. For newbies, there exist smallcase specifically designed to cater to the requirements and risk appetite of new investors. And for the experts, there is enough flexibility to customize the smallcase and update or change any time, thereby covering a huge spectrum of the investor demographic.

So, what is smallcase? Well, some might say, it is a modern investment tool for the modern Indian.