Best Small Cap Stocks in India to Invest in 2024
Best Small Cap Stocks in India to Invest in 2024
The stock market consists of thousands of companies out of which the majority of small-cap companies which have the potential to become blue chip companies. But with high growth potential, these companies also come with higher risks, therefore proper research and evaluation of these companies is required to pick the best small-cap stocks.
These small-cap stocks can prove to be multi-bagger stocks and have the potential to give you multifold returns in a short span of time. Finding multi-bagger stocks is a skill and learning how to find multi-bagger stocks can fulfill your investment needs in a short span of time.
What is a Small Cap Stocks?
Before understanding small cap stocks, it is first important to know what market capitalization is. Market Capitalization is the total market value of a company. To calculate the market value of a company, we calculate the share price of a company with the outstanding shares of the company which gives the total value of a company.
Small-cap companies are those companies with a small market cap of less than 5,000 crores are attributed as small-cap companies and their stocks are called small-cap stocks.
Why invest in small-cap stocks?
If you want to secure your future then you need to start early investing in stock market in these future stocks. When you are an early investor in the stock market, you can go for high-risk and high return small-cap stocks. It is also important to diversify your investment by allocating a small proportion of your corpus to risky small-cap stocks that can provide higher-than-average returns in a lesser time frame. Before buying small cap stocks we also need to know how to Select Good Stocks For Long-Term Investment?
Let’s analyze the upsides of investing in small-cap stocks.
- High potential of growth: Small-cap companies have the potential to grow faster than mid-cap and large-cap stocks as they are smaller companies and cause provide multi-bagger returns in a short period.
- Unrealized Market: Either the potential of the market or a particular company is not yet fully recognized by institutional investors, which gives an opportunity to tap into these stocks at a lower price and grow their investment.
- Variety of Options: The small-cap marketplace is quite big and therefore each small cap fund is different from one another. Every company has a different focus and different portfolios and there is hardly any common ground between their portfolios which is why these companies are not similar.
Best Small-Cap Stocks in India
The following small-cap stocks list is the list of some of the best growth stocks in India that is listed in the Indian stock exchanges. But before investing in these stocks there are some important ratios you must know.
1). Garware Technical Fiber Limited
Established in 1976, Garware Technical Limited is India’s leading player in the technical textile sector with products like fishing nets, sports net, safety net, high-performance polymer ropes etc.
It is the pied piper in the technical textiles in India. It has a strong worldwide presence in 75 plus countries and has a diverse product portfolio from fisheries, aquaculture to agriculture and Geo synthesis. The company has a highly qualified research and development team and 2 patents registered under its name.
2). Mold-Tek Packaging Limited
It is the market leader in rigid plastic packaging with around 25% of the market share. The company deals in the manufacturing of injection-molded containers that find application in your lubes, paint, food and other products.
The company has a huge customer base of reputed companies such as Himalaya, Adani Wilmar, Asian Paints, Nescafe, Amul and many more. It has set-up indigenous house robot manufacturers to make in-house robots to speed up the production of IML containers.
3). Amrutanjan Healthcare Limited
This company is in the business of Ayurvedic balm for pain treatment Since 1893. Today, Amrutanjan is the second biggest player in the head balm industry and offers other products for body pain and congestion and recently forayed into women hygiene with sanitary napkins. The company is 120 years and has a rich legacy attached to its name.
4). Paushak Limited
It is the largest in the list of India’s phosgene-based specialty chemicals manufacturers serving pharmaceuticals, agricultural and performance industries. The company is almost debt free and has strong promoter holdings of more than 66%.
5). Thyrocare Technologies Limited
This company is related to the healthcare industries and indulges in providing quality diagnostic services at affordable prices. Established in 1996 as India’s only economic thyroid testing center, it has now expanded to more than 2000 cities to become the world’s leading diagnostic chain.
This small market cap company is almost debt-free with a strong promoter holding and strong management.
Factors to Consider Before Investing in Small-Cap Stocks
Before investing in small-cap stocks, consider the following factors to make informed decisions.
Investing in these stocks can be a risky proposition which is having a stop loss while investing in these companies. Find out what Stop is loss and why is it important to minimize your risks of investing in small-cap stocks. consider the following factors to make informed decisions.
- Risk Tolerance: Assess your risk tolerance level. Small-cap stocks are often more volatile and can experience larger price swings than larger companies. Determine if you can tolerate the potential ups and downs in the value of your investments.
- Financial Health: Examine the financial health of the company. Look for positive revenue and earnings growth, a manageable level of debt, and strong cash flow. Ensure the company's financials are improving or stable over time.
- Market Position: Understand the company's market position and competitive advantages. Evaluate whether the company has a unique product or service offering that differentiates it from its competitors.
- Liquidity: Consider the stock's liquidity. Small-cap stocks may have lower trading volumes, which can make it difficult to buy or sell large positions without significantly affecting the stock's price.
- Growth Prospects: Evaluate the company's growth prospects. Look for small-cap stocks with the potential to expand their market share, enter new markets, or benefit from industry tailwinds.
Que 1. How much should one invest in small cap stocks?
Ans. Small-cap funds are considered more volatile. Therefore, investors with a longer time horizon and a higher risk tolerance may be more comfortable allocating a larger percentage of their portfolio to small-cap funds.
As a broad suggestion, financial advisors recommend allocating between 5% to 20% of your equity allocation to small-cap funds.
Ques 2. What are the benefits of investing in small-cap stocks?
Ans. Stocks in small-cap companies can yield high returns even though they are risky. For this reason, they are a suitable investment for aggressive investors. A long-term investment in small-cap shares can help accumulate extraordinary wealth as they have greater growth potential.
Ques 3. Are small-cap stocks worth investing in?
Ans. A small-cap stock is worth investing in, but it must match the investor's investment timeline, risk tolerance, and goals. Due to their early stage in the business life cycle, small-cap stocks carry a high risk of return. Despite the high risk, they also offer abnormal returns.
Ques 4. What is the difference between large cap and small cap stocks?
Ans- The primary difference lies in market capitalization, where large-cap companies possess a market cap of Rs 20,000 crore or more, whereas small-cap companies have a market cap below Rs 5,000 crore.