Small cap stock investing has historically been a tempting option among investors seeking to increase their wealth. In comparison to larger, more established firms, these stocks typically indicate companies with a better growth potential due to their smaller market capitalisation. In 2024, a number of small-cap stocks stand out as promising investment prospects as India’s economy continues to develop and undergo digital revolution. Let us unravel the realm of best small cap stocks.
What is a small-cap stock?
Firms classified as small-caps fall between the large-cap and mid-cap categories. The market capitalisation of small-cap stocks is typically less than ₹ 5,000 crores. If the market value of a corporation changes, this classification may also change. The market value of a company’s outstanding number of available shares is known as market capitalisation.
Smallcap stocks are defined by market regulator SEBI as companies with a market capitalisation ranking of 251 or above. By SEBI’s definition, all of these companies are small-capitalisation businesses. To monitor the performance of smallcap stocks in India, the NSE and BSE each have a benchmark smallcap index. These are the BSE Smallcap index and the Nifty Smallcap 100.
The best small-cap stocks are highly volatile because their value is based on changes in the market. Therefore, small-cap companies typically outperform in bull markets or uptrends and underperform in bear markets or market downturns. The price of small-cap stocks is lower than that of large- and mid-cap companies, so investors can easily buy them. Due to their reliance on market swings, small-cap stocks are more vulnerable to market downturns, such as during recessions, and often take longer to recover.
An investment in small-cap stocks is riskier due to this market behaviour. Small-cap stocks have a comparatively low share value but can rise by two or three times quickly. They can produce returns of more than 100% and turn into multi-baggers.
Top small cap stocks to buy now in India 2024
The following are the best small cap stocks in India to buy in 2024:
● Dhanuka Agritech Limited
Dhanuka Agritech Limited manages the Dhanuka Group’s agrochemicals, fertilisers, and seeds business and is one of the top small-cap stocks in 2024. The company offers the following products: Weedicides and 3D products (Dhanuvit, the company’s newest 3D product; previous 3D effects include Dhanzyme Granules and Dhanzyme Liquid).
Targa Super is the brand-new Super Star product offered by the business. Herbicides: The company’s line of herbicides is called Craze. To raise awareness of the advantages of seed treatment, the company has been operating grading and seed treatment machines right at the farmers’ doorsteps. The business offers them the benefit of having the seeds graded superiorly by automated machinery in a single procedure.
● Transpek Industry Limited
Transpek Industry Ltd is a prominent producer and supplier of various chemicals, catering to the needs of a broad sector of industries such as textiles, medicines, agrochemicals, polymers, etc. The company offers a variety of products, such as sulphur dichloride, sulphur monochloride, sulphur trioxide, oleum, and thionyl chloride.
● PSP Projects Limited
In 2009, the innovative infrastructure leader and licenced civil engineer Shri P. S. Patel created PSP Projects Ltd. It was a natural progression from his previous business, BPC Projects, which launched in 2006 and achieved remarkable results in just three years, turning over several hundred million Rupees, building a solid portfolio of projects, and winning over esteemed and devoted clients.
PSP Projects Ltd. has established a strong reputation for complete dependability through its customer-centric and value-based corporate culture, custom-designed approach, excellence in execution, on-time delivery, higher responsiveness, round-the-clock service mentality, and straightforward business ethics.
The Gala Family founded Navneet Education Limited (formerly Navneet Publications (India) Ltd), which publishes educational, children’s, and general publications, academic papers, and non-paper stationery products. The business has emerged as a magazine and stationery leader and developed a strong brand. Navneet has played a significant role in knowledge distribution since 1959.
With more than 5,000 volumes available in English, Gujarati, Hindi, Marathi, Tamil, Urdu, and other Indian and foreign languages, it is a significant force in the publishing industry. The business also operated in the stationery and publication industries.
● Accelya Kale Solutions Limited
One of the top providers of solutions to the international airline, logistics, and travel (ALT) sector is Accelya Kale Solutions Ltd. The company offers two main categories of services: IT Services, which include Verification and Validation, Business Solutions, e-commerce and Portal, Migration and Product Outsourcing, Application Development and Maintenance, and BPO Services, which include Products and Platform Solutions, Revenue Recovery and Protection Service, and a comprehensive audit service provider in the Airlines, Transportation & Logistics, Travel & Hospitality segment globally today.
Factors to check while picking small cap stocks
The following are certain factors to check while picking small-cap stocks:
- Safe harbour claims are frequently encountered, such as those indicating that past performance does not guarantee future success. Technically speaking, that is true, but when it comes to these small-cap stocks, the company’s previous five-year performance is the closest thing that can provide reassurance. Investing in tiny caps that don’t have a five-year track record is best avoided.
- Small-cap businesses only offer one product or one service category. They need more resources and managerial flexibility to overextend themselves. Thus, market size is essential. Positioning within the industry is more important than anything else.
- Do a fast system check on any outstanding issues with SEBI, any regulatory issues brought up by SEBI / RBI, etc., before purchasing any small-cap stock. It is advisable to avoid stocks of this kind if they are serious. These regulatory obstacles frequently overwhelm small-cap stocks, so it’s best to avoid them. These instances are commonly posted on SEBI’s website.
- Potential liabilities, such as ongoing legal proceedings, open derivative exposures, etc., are contingent liabilities. In the stock market, small caps are particularly susceptible to the adverse effects of contingent liabilities, which gives you a rapid indication of whether the business model incorporates disproportionate risks. Take extra care when an auditor resigns or is not qualified.
- Maintaining consistency is more important than achieving perfection. Companies with growth over the past five years are preferred to stay away from businesses with sharp swings in their financial performance. They are difficult to project in terms of cash flows. Consistent tiny caps also fetch higher market valuations.
Usually, small-cap stocks have yet to make it onto the list of well-known large-cap or blue-chip companies. Small Caps often need to be more proven businesses with enormous potential for future growth. All of the small-cap top stocks listed in this article have significant growth potential, making them all fantastic options for investors wishing to participate in the Indian stock market making them the top small cap stocks 2024. Putting money into small-cap stocks can increase returns and diversify your portfolio. Before purchasing any stock, even small cap stocks, you should conduct thorough research and analysis. Small-cap stocks represent a subset of the Indian stock market that consists of businesses with a significant potential for growth. A portfolio can be made more diversified and yield higher returns by investing in small-cap stocks. However, small-cap companies also come with greater risk; therefore, investors must do extensive research and analysis before investing.