Smallcap vs Nifty 50: How Deep the Falls Went and How Long Recovery Took (2007–2026) Smallcap funds have been India's favourite category for years. The pitch is simple: smaller companies grow faster, so their shares…
Smallcap vs Nifty 50: How Deep the Falls Went and How Long Recovery Took (2007–2026)
Smallcap funds have been India's favourite category for years. The pitch is simple: smaller companies grow faster, so their shares should too. Over long periods that has often been true. What the return tables don't show is the ride, and how long you can be stuck below your purchase price.
So I compared smallcap vs Nifty 50 using the daily values of the Nifty Smallcap 250 and the Nifty 50 from September 2007 to August 2026. For every fall of 20% or more, I measured how deep it went and how long each index took to get back to its previous high.
Quick answer
- Over 19 years, smallcaps returned more: 11.0% a year vs 9.3% for the Nifty 50, turning ₹1 lakh into ₹7.2 lakh vs ₹5.4 lakh.
- But the Smallcap 250 spent 48% of all days more than 20% below its peak. The Nifty 50: 13%.
- The 2008 crash took smallcaps down -76%, and they needed 6.7 years to get back to the January 2008 peak. The Nifty needed 2.8 years.
- The 2018–2020 smallcap fall was -61%, lasted over two years, and took 3.3 years from peak to recovery.
- Over 10-year periods, smallcaps beat the Nifty 79% of the time. Over 3 years, only 61%, with an 18% chance of a loss.
In this article
Smallcap vs Nifty 50: the returns
Here's the headline comparison. Smallcaps won on return, but at the cost of far deeper and longer falls.
| Nifty Smallcap 250 | Nifty 50 | |
|---|---|---|
| ₹1 lakh in Sep 2007 became (Aug 2026) | ₹7.19 lakh | ₹5.36 lakh |
| Return a year | 11.0% | 9.3% |
| Deepest fall | -76% | -60% |
| Time spent 20%+ below the peak | 48% | 13% |
| Time spent 10%+ below the peak | 62% | 34% |
| Falls of 20% or more | 5 | 4 |
Growth of ₹1 from 17 September 2007 to 31 August 2026, month-end values. Price indices, dividends excluded. Source: Yahoo Finance daily data for NIFTYSMLCAP250.NS and ^NSEI.
The end result hides a lot. For the first seven years, smallcaps were behind the Nifty, and an investor who started at the January 2008 peak was still underwater until late 2014. Most of the smallcap advantage came in a few explosive years: 2014, 2017, 2021, 2023 and 2024.
How often smallcaps are deep in the red
A drawdown is how far an investment is below its previous peak. The chart below shows it day by day for both indices. The shaded red area is the smallcap index; the further down it goes, the worse investors felt.
Drawdown from the previous peak, monthly lows. Red: Nifty Smallcap 250. Blue: Nifty 50.
Smallcaps were more than 20% below their peak for 48% of these 19 years, nearly half the time. The Nifty 50 was only that far down for 13% of the time, mostly in 2008–2009 and briefly in 2020.
Every major fall, and how long recovery took
These are every fall of 20% or more since 2007, from the previous peak to the bottom, and how long it took to get back.
Nifty Smallcap 250
| Peak | Bottom | Fall | Time falling | Back to peak | Peak to recovery |
|---|---|---|---|---|---|
| Jan 2008 | Mar 2009 | -76% | 14 months | Sep 2014 | 6.7 years |
| Aug 2015 | Feb 2016 | -24% | 7 months | Jul 2016 | 11 months |
| Jan 2018 | Mar 2020 | -61% | 2.2 years | May 2021 | 3.3 years |
| Jan 2022 | Jun 2022 | -27% | 5 months | Jun 2023 | 17 months |
| Sep 2024 | Mar 2025 | -26% | 5 months | Not yet (Aug 2026) | 1.9 years+ |
Nifty 50
| Peak | Bottom | Fall | Time falling | Back to peak | Peak to recovery |
|---|---|---|---|---|---|
| Jan 2008 | Oct 2008 | -60% | 10 months | Nov 2010 | 2.8 years |
| Nov 2010 | Dec 2011 | -28% | 13 months | Nov 2013 | 3.0 years |
| Mar 2015 | Feb 2016 | -23% | 12 months | Mar 2017 | 2.0 years |
| Jan 2020 | Mar 2020 | -38% | 2 months | Nov 2020 | 10 months |
Months from the previous peak until the index regained it. The 2024 smallcap fall had not fully recovered by August 2026.
Three things stand out. Smallcap falls were deeper: -76% and -61% at their worst, against -60% for the Nifty. They were slower: the 2018 smallcap fall kept going for 2.2 years before COVID finished it off. And recoveries took longer.
The most recent smallcap fall began in September 2024 and bottomed in March 2025, -26% down. By the end of August 2026 the index was still 1.3% below that peak, almost two years later.
When smallcaps win
Smallcaps still have a real case. Over long holding periods, they usually came out ahead.
| Holding period | Smallcap beat Nifty | Smallcap median | Nifty median | Smallcap worst | Nifty worst | Smallcap lost money |
|---|---|---|---|---|---|---|
| 3 years | 61% | 17.2% | 11.2% | -17.0% | -2.1% | 18% |
| 5 years | 57% | 13.5% | 11.7% | -7.4% | -1.0% | 10% |
| 10 years | 79% | 14.1% | 11.4% | 1.9% | 5.1% | 0% |
Over 10 years, smallcaps beat the Nifty 79% of the time, and no 10-year period lost money. Over 3 years, smallcaps won only 61% of the time and lost money 18% of the time, against 2% for the Nifty. The extra return comes with a requirement: you have to stay in for a long time, including through falls of 50% or more.
How to hold smallcaps without getting shaken out
- Size it so a 60% fall wouldn't make you sell. If your smallcap holding halved, would you hold on for five years? If not, it's too big. Many planners keep it to 10–25% of the equity portion.
- Give it 10 years. Money you need within five years has no business in smallcaps.
- Use a SIP. Smallcap SIPs bought a lot of units cheaply during 2008 and 2020, which is where long-term returns came from. Our ₹5,000 SIP study shows how much timing matters.
- Mind the costs. Active smallcap funds charge more; use the direct plan. See Direct vs regular mutual funds.
- Don't chase the last three years. Smallcaps attract the most new money right after big runs, just before the long falls. Our study on missing the best days shows why panic selling afterwards is so costly.
Frequently asked questions
Are small cap funds riskier than Nifty 50?
Yes, by a wide margin. From 2007 to 2026, the Nifty Smallcap 250 fell as much as -76% and spent 48% of the time more than 20% below its peak, against -60% and 13% for the Nifty 50.
How long do small caps take to recover after a crash?
After 2008, the Smallcap 250 took 6.7 years to regain its January 2008 peak. After the 2018–2020 fall it took 3.3 years. Smaller falls of 20–30% recovered in about one to one and a half years.
Do small caps give better returns than Nifty 50?
Over this period, yes: 11.0% a year vs 9.3%. Over 10-year windows smallcaps won 79% of the time, but over 3-year windows only 61%.
What is the maximum drawdown of small cap index in India?
In this data, -76%, from January 2008 to March 2009, for the Nifty Smallcap 250.
How much should I invest in small cap funds?
There's no single answer, but size it so a 50–60% fall wouldn't make you sell, and only use money you won't need for at least 10 years.
Related reading: Nifty 50 returns by calendar year · The cost of missing the best days · Where to invest ₹10 lakh for 10 years
Sources and method: Daily closes of the Nifty Smallcap 250 (NIFTYSMLCAP250.NS) and Nifty 50 (^NSEI) from Yahoo Finance, 17 September 2007 to 31 August 2026, on common trading days. A fall is counted from the previous all-time high to the lowest close before that high is regained. Rolling returns use month-end values. Price indices, dividends excluded. Index values before the Smallcap 250's 2016 launch are NSE's back-calculated history. Data ends more than 30 days before publication. See also Nifty Smallcap 250 (NSE Indices).
Disclaimer: WelthWest is an analytics and education platform, not a SEBI-registered investment adviser, research analyst or broker. Past performance does not indicate future returns. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Research and drafting were assisted by AI; the data, calculations and conclusions were checked by the author. This article is for educational purposes only and is not investment advice.