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Top Smallcap Stocks to Buy in India for 2023

Are you looking to invest in the next Amazon, Titan or Bajaj Finserv? Then you should definitely explore your options in small-cap stocks.

Most of the big and well-known companies started out as smallcap companies. For example, Berkshire Hathaway was once a struggling textile company. No moat. No rosy financials. Just a bleak future.

Or consider Apple, Microsoft, or Facebook. All these companies started out as smallcaps. With a proper management team and presence of economic moat, these companies made big bucks for investors and are among the top companies in the world today.

What makes small-cap stocks a good investment?

Historically, small-cap stocks have outperformed during times of economic recovery.

Small-cap stocks have been known to generate over 100x return on their original value in some cases. Investors with an appetite to take on some high risk and looking to make multibagger returns may consider investments in small-cap stocks.

But here’s the thing. Smallcaps also tend to be more volatile than largecaps, as they are more vulnerable to recessions, market crashes, and other shocks. They often have bigger swings on news like earnings reports.

If you pick the right smallcap stocks in India, you could be on the fastest road to generational wealth.

To get started, check out Equitymaster’s powerful stock screener to find the best smallcap stocks in India.

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Which are the top smallcap companies in India right now?

As per Equitymaster's Indian Stock Screener, these are the top smallcap companies in India right now.

These smallcap companies have been ranked as per their market capitalization. The higher the market cap, the higher the total value of the company.

Of course, there are other parameters you should take into account before forming a hard opinion on the stock valuation.

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 the benefits of investing in smallcap 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 stocks, read our detailed guide to screen the best smallcap stocks.

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.