New Delhi, Sept. 15 -- Indian investors are continuing to put money into small-cap funds even as the equity market remains volatile. In August, small-cap mutual funds attracted Rs.7,973 crore, while overall equity mutual fund inflows rose nearly 19% from the previous month to Rs.29,328 crore. SIP contributions also touched a record Rs.32,297 crore.

That makes the behaviour of small caps particularly relevant for investors. A FundsIndia analysis of historical market data shows that investors in this segment have had to endure substantially deeper declines than those seen in large-cap indices.

The easiest way to understand the difference is to look at drawdowns. A drawdown measures the fall in an index from an earlier peak. It tells inves...