InvestmentFinancial Glossary
Micro Cap
Definition
Companies ranked below the top 500 by market capitalization on Indian stock exchanges. While SEBI does not officially define 'micro cap' as a category, the term is commonly used for companies with market capitalizations below Rs 500-1,000 crore. These are typically very small, early-stage, or niche companies with limited analyst coverage.
Why It Matters
Micro-cap investing offers the highest return potential — a Rs 200 crore company can realistically become a Rs 5,000 crore company in 5-7 years. However, micro-caps carry extreme risks: low liquidity (you may not be able to sell when you want), limited financial disclosure, higher susceptibility to manipulation, and high failure rates. Limit micro-cap allocation to 5-10% of your equity portfolio at most.