Small-Caps: just volatile, or are they also risky?

Indian markets have had a fantastic run during the last quarter, particularly due to a spectacular performance from the Small Cap Index that delivered around 20% returns. It is interesting that 46% of stocks have run up more than 20% during the last quarter—underlining the broad-based euphoria. With this kind of performance, it’s natural to hear murmurs around “risk of equity investing" at these levels – more particularly in small caps. But, is small-cap investing really risky or is it just volatile?