Microcap stocks are publicly traded companies that have a market capitalisation which is lower than small, mid, and large-cap stocks.
While the stocks which rank below 250 on marketcap are all considered smallcap, there is an index which distinguishes smallcaps and microcaps.
It's the Nifty Microcap 250 index.
This index has the top 250 companies beyond the NSE Nifty 500 index.
It's made up of microcap companies ranked from 501 to 750, based on of their average full market capitalisation.
Investing involves a certain amount of risk and when it comes to microcap stocks. Most of the companies are new to the mix. They may not have significant revenues or profit growth.
Microcap stocks are more risky compared to bluechip or mid-cap stocks. Also, they tend to be extremely cyclical.
However, microcap stocks present a huge growth potential.
Microcaps are like chocolates. Very tasty and tempting yet they can be bad for health. Just like how connoisseurs can't keep their hands off chocolates, analysts can't stay away from the best microcap stocks.
It's very typical for a good microcap stock to turn a multibagger in a matter of months.
For finding such multibaggers, one needs to follow a certain process.
Eicher Motors, Avanti Feeds, Astral Polytechnik and the likes were tiny microcaps two decades ago. Skip forward to present, they are the market darlings today.
For more details about microcaps, check out our blueprint to find the best microcap stocks in India.
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