Explained | How smallcases work and should you invest?

Smallcases are baskets of stocks, exchange-traded funds (ETFs), and real estate investment trusts (REITs) based on a theme, idea, or strategy.

"Based on a user’s investment goals, risk appetite, preferred strategy or theme, s/he can choose from a catalogue of 500+ smallcases and use existing trading and demat accounts with any of the 17 brokers that have partnered with Smallcase to login and place an order to buy the whole portfolio in a single click. The investor can then track the smallcase as a single unit," Kamath said.

As per May 2023 data, the top 10 best-performing smallcases (since their inception three years ago) were primarily factor-based, thematic, and sectoral smallcases. The following table outlines the top smallcases across categories:

Retail investors who want to invest in curated baskets of stocks, ETFs, and REITs that are based on a theme, strategy, or goals can explore smallcases.

"This will help investors build cost-effective, long-term, and diversified portfolios easily. Those who have started out with mutual funds and want to diversify their portfolio further with direct equity can explore smallcases for niche themes, focused strategies, greater control & transparency in their portfolios. The smallcase format helps with diversification over single stocks and a wide range of strategies and objectives from multiple research and advisory firms and smallcase managers," Kamath told CNBCTV18.com.

"New-to-market investors who are starting their equity journey with a demat account can consider smallcases for relatable ideas to help them take a simple and healthy approach towards equity investing. Typically, asset allocation-based portfolios, large-cap strategies based on dividends, or overall market exposure are popular choices for these investors," he said.