Small Caps - Outperformers in Current Financial Year - Chart Of The Day 4 November 2017 - Equitymaster

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Small Caps - Outperformers in Current Financial Year
Nov 4, 2017

Are these a sign of changing times?

Traditionally, investors held onto their 'safe' stocks, i.e. the Tata's, Maruti's, TCS, Infosys... and held on to them for life. These large caps provided a certain sense of comfort, reliability even during tough times for the market.

But if the data in FY18 is anything to go by, there has been a marked change in investing patterns. Small caps have comfortably outperformed the Large caps and how.

The BSE Small cap Index has returned 21.7% in FY18 compared to 12.5% by BSE 100 and 11.7% by the Sensex.

Expectedly, valuations of certain Small cap companies have gone through the roof. It is important to understand the highly volatile nature of these stocks. In a downturn, these stocks tend to move in the opposite direction much faster as well.

While there, undoubtedly, lies hidden opportunities in the small cap space, it is important to focus on fundamentals of these stocks. Next, assess if they have the potential to move on to the 'Safe stock' category in the future.

Source: BSE

This Chart Of The Day was published in The 5 Minute WrapUp - Best of Both Worlds For a Trader and An Investor

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