India’s SME capital market is no longer a niche corner of the stock market. Over the last few years, SME exchanges have evolved into one of the fastest-growing segments within Indian equities, attracting increasing participation from retail investors, institutional allocators, and alternative investment funds. Now, StepTrade SME Fund is positioning itself at the center of that trend.
Led by Kresha Gupta, StepTrade Capital has structured what it describes as India’s first dedicated Alternative Investment Fund platform focused entirely on the institutionalisation of the SME-Exchange equity ecosystem.
The strategy reflects a broader shift happening across India’s investment landscape: SME and microcap investing is increasingly moving from speculative retail activity toward structured institutional participation.
Why SME Exchange Investing Is Gaining Serious Momentum
India’s SME exchanges — primarily the NSE SME and BSE SME platforms — were originally designed to help smaller businesses access public capital markets more efficiently.
What began as a niche financing avenue has now become a meaningful capital formation ecosystem.
According to data highlighted by StepTrade Capital, the S&P BSE SME IPO Index delivered a 58.67% CAGR over the last 10 years, substantially outperforming broader mainboard benchmarks during the same period.
Another notable trend is migration potential.
StepTrade notes that more than 40% of SME-listed companies have eventually migrated to the main board, creating significant re-rating opportunities for early investors.
This migration effect has become one of the biggest drivers behind institutional interest in SME-focused strategies.
The StepTrade SME Fund Thesis
The core idea behind the StepTrade SME Fund strategy is relatively simple but structurally important:
Identify scalable SME and microcap businesses early, institutionalise investment exposure through regulated AIF structures, and participate in long-term wealth creation before companies become mainstream market names.
Unlike traditional diversified equity funds, StepTrade’s approach focuses specifically on:
- SME exchange-listed businesses
- Microcap opportunities
- Pre-IPO and IPO-stage companies
- Growth-oriented sectors
- Undervalued scalable businesses
The firm operates across Category II and Category III AIF structures, alongside FPI and GIFT City licenses.
Its current fund lineup includes:
| Fund | Structure | Focus |
| Chanakya Opportunities Fund I | Category II AIF | SME-focused growth investing |
| Chanakya Opportunities Fund II | Category II AIF | Scalable SME businesses |
| Steptrade Revolution Fund I | Category III AIF | SME & microcap listed equities |
| Steptrade Revolution Fund II | Category III AIF | Listed and pre-listed SMEs |
| Steptrade India Fund | Global feeder structure | SME and microcap exposure for foreign investors |
Kresha Gupta Is Emerging as a Young Face in India’s AIF Space
One of the reasons StepTrade has attracted industry attention is its leadership story.
CA Kresha Gupta is widely recognized as one of India’s youngest AIF fund managers and among the few investment professionals building a full-scale institutional strategy around SME exchange investing.
Before founding StepTrade, Gupta worked with Vodafone Idea and later managed her family office before entering the alternative investments industry.
Her investment philosophy appears heavily centered around:
- Bottom-up research
- SME discovery
- Governance-driven investing
- Long-duration compounding
- Early-stage institutional participation
That positioning is important because SME investing in India has traditionally suffered from concerns around governance quality, liquidity, and information asymmetry.
Institutional frameworks could gradually change that perception.
StepTrade’s Numbers Show How Quickly the Segment Is Scaling
The growth trajectory of StepTrade itself reflects the increasing appetite for SME-focused investment products like StepTrade SME Fund.
According to company disclosures:
- The platform manages more than ₹350 crore in assets
- It has participated in over 100 SME investments
- The team collectively brings more than 100 years of market experience
- The firm has completed 72+ anchor investments
- It has made 25+ unlisted investments
Its first Category II strategy, Chanakya Opportunities Fund I, initially targeted ₹100 crore but eventually expanded to ₹200 crore through a green shoe option due to strong investor demand.
The fund reportedly plans allocations across approximately 20–25 SMEs with ticket sizes ranging from ₹2 crore to ₹10 crore per company.
The Institutionalisation of SME Investing Has Bigger Implications
What makes the StepTrade model interesting is not just the StepTrade SME Fund structure itself, but what it represents for India’s broader capital markets.
Historically, institutional investors largely avoided SME exchanges because of the following:
- Lower liquidity
- Governance concerns
- Smaller disclosures
- Limited research coverage
- Execution risk
However, this is beginning to change for three major reasons:
1. SME IPO Pipeline Is Expanding Rapidly
India has seen a sharp increase in SME IPO activity over the last two years.
Institutional participation is becoming increasingly important in these issues, especially through anchor allocations and pre-IPO investments.
StepTrade itself claims to have deployed around ₹177 crore across nearly 63 IPOs over a 24-month period, generating average listing gains of roughly 35%.
2. Domestic Capital Is Moving Beyond Large Caps
As large-cap valuations become more expensive, sophisticated investors are increasingly exploring alpha opportunities in under-researched segments.
SMEs and microcaps offer:
- Higher growth potential
- Lower institutional saturation
- Earlier-stage value creation
- Sector-specific niche opportunities
This is particularly relevant in themes such as:
- Renewable energy
- Defence manufacturing
- Electronics
- Infrastructure
- Waste management
- Industrial supply chains
Several of these sectors align closely with India’s manufacturing and self-reliance push.
3. Alternative Investment Funds Are Becoming More Specialized
India’s AIF market is moving away from generic “multi-strategy” positioning.
Instead, investors are increasingly allocating toward highly specialized themes with clear differentiation.
StepTrade’s SME Exchange-focused structure reflects that trend directly.
Rather than competing with mainstream equity funds, it is attempting to create a distinct institutional category around SME investing.
Risks Still Exist in SME Investing
Despite the optimism, SME investing remains a high-risk segment.
Liquidity can dry up quickly during market stress, and corporate governance quality can vary widely across companies.
Key risks include:
- Sharp volatility
- Lower trading volumes
- Execution failures
- Dependence on promoter quality
- Regulatory risks
- Concentration exposure
This is exactly why institutional underwriting, due diligence, and portfolio construction become critical.
StepTrade’s positioning heavily emphasizes research-led investing and governance screening as core filters within its strategy.
Final Thoughts
The StepTrade SME Fund strategy reflects a larger transformation happening inside India’s capital markets.
SME exchanges are gradually evolving from speculative retail-driven platforms into structured institutional opportunity pools.
By creating India’s first dedicated SME Exchange-focused AIF ecosystem, StepTrade Capital is attempting to institutionalize a market segment that has historically remained fragmented and underpenetrated.
Whether this becomes a long-term category-defining strategy will depend on execution, governance standards, and portfolio performance across market cycles.
But one thing is increasingly clear: India’s SME and microcap ecosystem is no longer being ignored by institutional capital.