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Demonetisation Could Create the Biggest Buying Opportunity in Small Caps This Year - Views on News from Equitymaster

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The Equitymaster Research Digest

Demonetisation Could Create the Biggest Buying Opportunity in Small Caps This Year
Nov 23, 2016

  • Demonetisation is just the beginning
  • Microfinance hit hard by demonetization
  • The elusive pursuit of the 100-bagger

Economists are confused. Markets are nervous. The doomsayers are predicting an end of the bull run for Indian markets.

The BSE Sensex has lost 5% over the last two weeks. But it is the small-cap space that is offering the real bargains.

The BSE Small-Cap Index is down 11%. More than 150 stocks have corrected by a fifth in last fifteen days. And the turnover of BSE small-cap stocks is down by more than 40%.

Before we share the buying opportunities, let us see what demonetisation means for small-cap stocks.

In our meetings with managements, one of the common challenges these companies tell us about is competition from the unorganised segment. The latter operate locally on a low scale and rely mainly on cash sales.

With all the changes taking place around us, it is the informal segment and unlisted small businesses that will be worst hit. The cost of doing business for companies in the unorganised segment is likely to go up.

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