Applying Rebalance
Rebalance update doesn't affect your total returns. Total returns before and after rebalance remains the same. Let’s understand it with a very simple example.
Suppose you invested Rs 100 in Stock A. After 3 months the value of your investment increased to Rs 120. This is how your P&L summary will look.
Investment Overview Before Rebalance:
Now you decide to sell Stock A and Buy Stock B. You will get Rs 120 when you sell Stock A. At this point Rs 20 moves from your current returns to realised returns.
But the the total return which is the summation of realised and current returns, remains the same. This is how your performance summary will look like once you complete the transaction.
Investment Overview After Rebalance:
The same would happen when you rebalance your smallcase. You sell few stocks and buy few stocks, but your total returns more or less remains the same.
Skipping rebalance:
If you choose to ignore it, the current constituents and weights will be retained
However, please note that some of the stocks in the smallcase may no longer follow the intended theme if you ignore the rebalance update