Which are the top smallcap growth stocks in India right now?
As per Equitymaster's Stock Screener, these are the top smallcap growth stocks in India right now -
These companies have been ranked as per their 3-year profit compounded annual growth rate (CAGR) and their 3-year sales CAGR.
We have also taken into account the return on equity (ROE) and debt to equity ratio of these companies.
High growth companies have the potential to generate multibagger returns. But if these companies disappoint even slightly, they could get punished heavily by the market due to high valuations.
However, there are other parameters you should take into account as well before forming a hard opinion on the stock.
What are smallcap stocks?
According to the market regulator, smallcap stocks are companies which rank 251st and beyond in terms of their market capitalisation.
Investing in them is perceived to be risky. However, the potential for higher returns makes them an appealing investment avenue.
What are growth stocks?
Growth stocks are companies whose sales and profits are growing at a faster pace than the market.
The top growth stocks usually trade at a premium to other stocks in the market because investors are willing to pay for the higher profits in the years ahead.
The faster they grow, the bigger the returns are for shareholders.
What are the benefits of investing in smallcap growth stocks?
Smallcap growth stocks are one of the most exciting segments in the market, as small companies with higher growth rates often offer investors the opportunity for market-beating returns.
These companies are sitting on the runway, waiting to take-off. However, they usually tend to trade at a premium valuation.
If you're looking to invest in smallcap growth stocks, read our detailed guide to screen the best smallcap growth stocks.
Also watch this video where we explain how to pick growth stocks in India.
How much should one invest in smallcap stocks?
According to us, in a scenario of ideal allocation of funds, small cap stocks should not comprise more than 10% of one's total equity portfolio.
Further, we believe that a single small cap stock should ideally not form more than 2-3% of the total portfolio.
How should you screen smallcap stocks?
Investing in smallcap stocks can be a tall order because they are less proven, and so are rife with speculative investment due to lack of data and operation history.
If you're looking to invest in the smallcap space, this is how you should screen for the best smallcap stocks.