πŸ“’ Best Small Cap Stocks in India

Companies with a market capitalization of less than rupees. 500 Crore is classified as a small cap company. Over 95% of Indian companies are considered small cap stocks.

This type of company holds more than 251 ranks and tends to run in the early stages of economic recovery, and the stocks issued by such companies are called small-cap stocks.

What are small-cap stocks?

Small-cap stocks are shares of a small company listed on the stock exchange.

Investors who want to generate higher returns from their investments tend to make small-cap stocks a good option. In addition, individuals with high risk tolerance and potential market risk can consider this investment option.

These stocks are volatile in nature and are prone to market risk when the market is low. However, investors can mitigate the risk factors associated with small cap stocks by adding market-appropriate investments to their portfolio.

πŸ“’Small Cap Stocks Company 2020: NIFTY SMALLCAP

  • Firstsource Solutions Ltd.
  • Mahindra CIE Automotive Ltd.
  • Godfrey Phillips India Ltd.
  • IOL Chemicals & Pharmaceuticals Ltd.
  • NBCC (India) Ltd.
  • Sonata
  • TV18 Broadcast
  • Ircon Internati
  • MCX India
  • DCM Shriram
  • Laurus Labs
  • Strides Pharma
  • Aster DM Health
  • Hind Copper
  • GNFC
  • Balrampur Chini
  • Firstsource Sol
  • Welspun Corp
  • Linde India
  • Galaxy Surfacta
  • CenturyPlyboard
  • RITES
  • Tata Elxsi
  • Rashtriya Chem
  • India Cements
  • Affle India
  • Godfrey Phillip
  • MMTC Ltd
  • Kaveri Seed
  • Rallis India
  • MOIL
  • Persistent
  • KEC Intl
  • Lakshmi Machine
  • Spandana Sphoor
  • Vakrangee
  • Equitas Holding
  • INOX Leisure

Features of Small-Cap Stocks:

Those who want to invest in small cap stocks should learn about these following characteristics –

Volatility: Small-cap NAVs tend to be highly sensitive to market volatility and do. For example, these stocks work well in the high market phase, but tend to perform poorly when the market is struggling.

Risk Factors: Small-caps are market dependent and therefore vulnerable to fluctuations. These stocks are susceptible to market recessions and will take some time to recover. This makes small-cap stock a risky investment option.

Returns: Small-caps are included in high-yielding investment options. It is believed that they have the potential to emerge as multi-baggers by generating over 100% revenue.

Investment Cost: In addition to the initial cost of acquiring a small cap, the investor also has to pay an annual fee called the expense ratio. The same upper limit is 2.5% of the AUM average. Investors who invest in small cap stocks with the lowest cost rates will generate better returns from them.

Investment Horizon: Individuals can invest in Indian small cap stocks, both long-term and short-term. However, investors should opt for small cap stocks with long investment periods in order to diversify the risks associated with them and generate substantial returns.

Taxation: Returns incurred from the redemption of small shares are treated as income under Section 80C. Profit generated in this way is subject to short-term capital gains tax at a rate of 15% if the shares are held for less than one year. However, profits from shares held for more than a year will attract long-term capital gains tax at a rate of 10%.

Reasons to Invest In Small-Cap Stocks:

There are three reasons investors can consider putting their money into small cap stocks.

The reasons are –

  • Benefit from the growth potential of small cap companies.
  • Due to market inefficiencies, high quality stocks are available at low prices.
  • Opportunity to use small cap stock at a fair price that is not affected by major financial institutions.

Key Benefits of Small Caps:

Individuals investing in the best small cap investors take advantage of these benefits described below –

Greater growth potential

Compared to large-cap companies, small-cap companies tend to have higher internal growth rates. Unlike them, SMEs have great potential to grow and acquire capital over time. This particular aspect works in favor of small cap stocks and greatly increases their growth potential.

Quite price

Major institutional investors must comply with certain restrictions on investing in the best small cap stocks. It limits their power to push up stock prices directly. This favors small investors over institutional investors and allows them to take advantage of small cap stock at a fair price.

Low price high quality stock

Stock prices are low because small businesses are not well recognized and their markets are likely to be inefficient. Investors can benefit from such inefficiencies with a little research and market valuation by acquiring high quality stocks that are offered at lower prices.

Small cap related risks

The risks associated with investing in small cap stocks in India are:

  • It is subject to market risk that can only be mitigated in the long run by properly balancing asset allocation and portfolio.
  • It provides investors with relatively little liquidity and cumbers the selling process.
  • It takes time and research to determine its effectiveness as an investment vehicle.

Small cap stocks generate better returns, but they carry significant risk. Risk-averse individuals and conservative investors are not suitable for such investment options. They also need to understand that they cannot take advantage of taking advantage of higher returns through small caps.

Alternative investment options

As another note, if investors do not have a strong risk appetite to survive market volatility, they may opt for less risky investment options.

Investors can put money on these alternative investment paths –

Large Caps – Stocks of companies ranked in the top 100 are classified as large caps. Large-cap stocks are less susceptible to market fluctuations. This makes it suitable for long-term investors with medium to low risk.

Hybrid Funds – Investors can also research hybrid and balance funds as alternative investment options. Hybrid funds are the perfect combination of both debt and equities. This allows investors to diversify their portfolios, diversify their risks and get solid returns.

Government Securities – Individuals can also invest in government securities. These are usually government-issued bonds that are suitable for risk-averse investors seeking stable and reliable returns.

Investors, whether small caps or mutual funds, should always choose an investment method that suits their requirements and financial position.

In addition, investors need to take risk appetite into account before investing and allocate their investment accordingly.

However, if the individual is not familiar with the market knowledge, there is always the option to seek professional assistance.

FAQ-

Que- What is considered a small cap stock?

The market capitalization of a company is the market value of the issued shares. The definition of a small cap varies from broker to broker, but is typically a company with a market capitalization between $ 300 million and $ 2 billion.

Que-What are the best small cap stocks?

  • Firstsource Solutions Ltd.
  • Mahindra CIE Automotive Ltd.
  • Godfrey Phillips India Ltd.
  • IOL Chemicals & Pharmaceuticals Ltd.
  • NBCC (India) Ltd.
  • Sonata
  • TV18 Broadcast
  • Ircon Internati
  • MCX India
  • DCM Shriram

Que-What are the top 10 small cap stocks?

  • Rashtriya Chem
  • India Cements
  • Affle India
  • Godfrey Phillip
  • MMTC Ltd
  • Kaveri Seed
  • Rallis India
  • MOIL
  • Persistent
  • Vakrangee

Que-What is a small cap stock in India?

500 Crore is classified as a small cap company. … more than 95% of Indian companies are considered small cap stocks. This type of company holds more than 251 ranks and tends to run in the early stages of economic recovery, and the stocks issued by such companies are called small cap stocks.