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These 3 Smallcap Stocks are Set to Make the Most of Smallcap Rebound

Jul 9, 2019

Richa Agarwal, Research analyst

The event of Union Budget 2019 is past us now.

The roadmap to a US$ 5 trillion economy in 5 years has wiped out Rs 5 trillion wealth of equity investors in just 2 days.

The Sensex yesterday witnessed the steepest fall in a day this year. The smallcaps too have taken a hit.

One of the reasons for the fall in the markets was fears of a high tax surcharge on FPIs (foreign portfolio investors).

With such sentiments, the smallcap rebound may take a little longer to play out.

But that's not bad news at all. It just gives you more of action time and opportunities now to invest in.

Here is why the smallcaps look even more attractive at present.

As per the data I pulled out a few days ago, top 100 companies comprise nearly 74% of total market capitalisation of listed companies. This is up from 67% share in December 2017(the quarter in which the Capital market regulator came up with reclassification rules).

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Over the same period, the share of combined marketcap of smallcaps has fallen from 16% to 10%.

One must note that the overall market cap of listed companies has moved down just by 2%.

The trend of smallcaps getting out of favour started with the Capital market regulator's reclassification of mutual fund schemes.

The reallocations led to fall in smallcaps. And that itself led to a vicious cycle - lower market caps in smallcaps further kept bigger investors at bay.

So, while large caps seem to be standing tall, they are in a precarious situation as you can see in this chart.

Markets Skewed Dangerously in Favor of Top 100 companies

Markets Skewed Dangerously in Favor of Top 100 companies

It would not be wrong to conclude that most large caps are in a bubble zone. On the other hand, smallcaps are sitting in the oversold territory.

Coming to distortion caused by big investors....

The overall institutional money in stock market has increased by 5.8% from December 17 to March 19.

Institutional money in large caps is up 13%. Top 30 companies command 63% of institutional money at present.

In midcaps, institutional money is down by 5%.


Most importantly, the institutional money in smallcaps is down 36%. The entire smallcap space commands just 5.1% share of institutional money.

As the sense of normalcy returns to the markets, even if a small share of this money flows back from large caps to smallcaps, especially quality smallcaps, the rebound could be huge.

That's because this quantum of money could give a strong positive impact to valuations of less liquid smallcaps.

But like I said, the money will come back only to quality smallcaps.

Here are a few that I believe will make the most of the smallcap rebound:

  • The first company, a market leader in its niche, is a great play on the farm mechanisation in India, with debt free balance sheet and dividend yield of more than 3%.
  • The second company is an NBFC that is defying all the adversities amid the ongoing liquidity crisis, and emerging stronger with 'retailisation' of the loan book.
  • The third company, again a market leader in its niche, is a non-commodity player in an otherwise commoditized industry with healthy return ratios, and strong dividend payouts.

You could get details of all these stocks in my premium report - One Stock Crorepati: The 3 Multibagger Stocks Collection.

Along with the crorepati stock, these three stocks could be some of the biggest gainers in the smallcap space.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure

PS: 10,064 people watched the One Stock Crorepati Summit. Richa Agarwal, our small cap expert, talked about those stocks which turned a select group into crorepatis. She also revealed her formula to identify such stocks. Click here to watch the One Stock Crorepati Summit.

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8 Responses to "These 3 Smallcap Stocks are Set to Make the Most of Smallcap Rebound"

J Mathews

Jul 24, 2019

Some of the views expressed below are very valid. The webinar's are practically a waste of time as you keep on repeating your past performances and spend a whole lot of time on it and that too some of them are repeated in different ways, this seems to be more of a sales talk than a recommendation. How about highlighting your failures too. Some of the recommendations are not worth investing in.

I suggest you come up with better ways of communicating your recommendations.

Like 

LAKSHMANAN L N L

Jul 22, 2019

Hi
I have subscribed to Hidden Treasures and Stock Select (and earlier to Profit Hunter).
I have a few suggestions on communication. None can beat about the bush like you and your analysts.

1. You have a feeling that we are all full time employees of Equitymaster. Please remember that many of us cannot spend more than 20 minutes a day on Equitymaster.

2. I discontinued PH since Apurva Seth wasted 90% of my time since he does not know how to communicate. And his recommendations were nothing to write home about. Over many of his calls were worse than mine.

3. How many times can we see the charts of Page Ind, eClerx etc? Why don't you segregate your clients and avoid all such 'sales' mails to people who have already subscribed?

4. Cannot you write the recommendations alone precisely without all the regular blah-blahs? Whatever we can read elsewhere should not be described by you. Deal only with your recommendations and its reviews. Avoid ALL other general stuff since we are not paying to read such general stuff.

5. The 10-minute Webinars are the most time-effective for us especially the ones by Tanushree. The 30-50 minute webinars are the worst. We have to spend over an hour just to get one or two concepts. Why do you want to punish us like this?

6. I would thank you a million times if you can stop your sales mailers!!!!!!!!!

Like (1)

Ravichandran

Jul 17, 2019

No clue of what you want to recommend for investment
We hear an hour long video of Ms. Richa Agarwal (a repetition of past subject again and again) then handing over to someone else, who again asks for subscriptions that I have already made
Can you please ask some of your representative to call in person to describe
I subscribed to two of Equity Master's recommendations by paying 1950 each and wonder if I had made a mistake I feel it is a complete waste of time and money
Hope you will take this feedback seriously and do something about it
Regards
S. Ravichandran

Like (4)

Shailesh shah

Jul 12, 2019

I have read your report and noted the content. But pl let me know abt. Small cap stretegi for selection

Like (4)

akshay

Jul 10, 2019

Where is the report of 3 stocks?

Like (6)

S Fazal ahmed

Jul 9, 2019

Could not find which are the three multibagger stocks. Kindly do name them so as to enable me to offer comment.It is also requested that for a beginner or new entrant and subscriber it is better to ease and simplify the process of knowing the names of stocks recommended to enter into which will not only save time of an individual who is already frustrated with the erratant behavior of the stock market and do posses limited knowledge of using internet

Like (3)

Alpesh

Jul 9, 2019

Hi,
I clicked on the URL for the 3 Crorepati Multibagger Stocks but it takes me to the Hidden treasure page.
On checking, there is no new report uploaded.

Please check and correct it.

Regards,
Alpesh

Like (1)

Hemant Maradia

Jul 9, 2019

Hi,

I would like to draw your attention to the fact that the URL to the following text in the article takes me to the Hidden Treasure page and there is no sign of any special report to download.

One Stock Crorepati: The 3 Multibagger Stocks Collection.

Kindly rectify the problem.

Like (10)
  
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