»Profit Hunter by Equitymaster

On This Day - 7 MARCH 2019
Smallcaps Are Rallying and You Need to Make the Most of It Now

Richa Agarwal, Research analyst

After being down for more than 13 months, small and midcap stocks are rallying.

In just two weeks, the BSE Smallcap index has gone up 10%, while the BSE Midcap index is up by around 7%.

This comes at a time when the mainstream media had completely written off smallcap stocks.

Most retail investors too have made the flight to safety to largecap stocks or other assets like gold and fixed deposits.

{inlineads1}

However, if you have been paying attention, I've been harping on about the potential opportunities in small-cap stocks when they were beaten down.

Smallcaps have been falling since the start of 2018.

But the fall worsened since September, weighed down by a host of macro factors.

Rising crude oil prices and a Rupee at all-time low levels, followed by a liquidity crunch in the economy, did no good for market sentiment.

All the negative news flow pushed investors away from smallcaps. These stocks bore the brunt of the downturn.

While the macro factors contributed to the smallcap slide, they were not the real reason for the downturn.

The real culprit was high valuations.

In the massive rally that ended at the beginning of 2018, smallcaps had reached unsustainable levels of valuations.

{inlineads2}

When smallcaps were racing to new peaks, everyone bet on the next big Page Industries or Eicher Motors.

They couldn't get enough of smallcaps.

The retail investor was willing to pay just about anything for them. Consequently, the smallcap index itself touched sky-high valuations.

And then it all came crashing down.

But things could be turning around...

One of the biggest reasons Indian stocks have performed badly - valuations - is now also the reason why they are likely to give great results from here on.

Many small caps are trading at attractive valuations now.

{inlineads3}

Now you might be wondering, if I still think it is a good time to buy?

Yes, I do.

It is not too late to act now.

Smallcaps have begun their journey upwards but they are nowhere near the highs they touched last year.


That is not to say that the tide has definitively turned in their favour.

But many fundamentally strong smallcap stocks are attractive at their current prices.

They could prove to be potential multibaggers in the years to come.

This is exactly the approach I take in Hidden Treasure.

I focus on the fundamentals and wait for the stocks to catch up to their intrinsic value.

I have been recommending attractive smallcaps to my Hidden Treasure subscribers in this correction.

As I write this, I have 25 fundamentally strong smallcap stocks in the 'Buy' position to choose from.

So, act now, lest you miss out and take advantage of the opportunity that is available in the best smallcap stocks today.

Regards,

Richa Agarwal
Richa Agarwal (Research Analyst)
Editor, Hidden Treasure

PS: Now - when the small cap market looks very sad - is the time to buy into it. Heed this advice from small cap expert Richa Agarwal - and get into these stocks now.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.

Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407