Investing in growth stocks can significantly boost your wealth in the stock market. To succeed, you need to identify the right growth stocks and timing and also understand what are growth stocks.
In 2022, many growth stocks experienced substantial losses, with the S&P 500 index plummeting over 19% and the S&P 500 Growth index dropping 30%. Some stocks fared even worse, losing half or two-thirds of their value. However, during the first half of 2023, growth stocks made a strong comeback, surpassing the broader market. This suggests potential for continued outperformance.
To help you begin your journey into growth stock investing, we offer a practical guide equipped with tools and strategies to position your portfolio for long-term success. Now, let’s understand what is growth stock.
What are Growth Stocks?
Growth stocks exhibit a growth rate that is much higher than the market’s average growth rate. It shows that the stock grows faster than the market’s average stock, which causes earnings to increase faster. These stocks don’t pay dividends.
Many small-cap stocks are considered fast growing stocks in India. However, some larger companies may also be growth companies.
Now that we know what is a growth stock, let’s look at some of the top companies who have experienced share growth in 2023.
Trending Growth Stocks List in 2023
Here’s a list of best high growth stocks
|Stock Name||Market Cap||Share Price|
|Jindal Stainless Steel||₹27,502 Cr||₹454.6|
|Polycab India||₹53,077 Cr||₹5,123.05|
|Deepak Nitrite||₹30,605 Cr||₹2,220|
|Bajaj Finance||₹4,38,487 Cr||₹7,163|
|Adani Green Energy||₹1,52,336 Cr||₹928.65|
|Varun Beverages||₹1,05,663 Cr||₹899.5|
|KEI Industries||₹20,151 Cr||₹2,707.5|
|Avanti Feeds||₹5,291 Cr||₹434.2|
|JSW Steel||₹1,85,892 Cr||₹779.65|
The data is from 31st August 2023. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Why invest in Growth Stocks?
Fast growing stocks in India may provide you higher capital growth as compared to any other type of stock. These businesses grow at a pace that is much faster than the industry average. Thus, investing in growth companies can increase the value of your money over the long and short terms. Given optimal market circumstances and price rise over the long run, your money may even double with further compounding.
Your money may outperform inflation by investing in growth stocks. According to financial experts, the true growth of your money is the growth rate minus inflation.
Top 3 trending growth stocks in India.
Here is an overview of the 3 trending growth stocks in India.
Jindal Stainless Ltd
Jindal Saw Limited is engaged in manufacturing stainless steel. It’s products include slabs, blooms, hot rolled (HR) coil, cold roll (CR) coil, plates, coin blanks, precision strips, blade steel and stainless steel plumbing. On a trailing 12-month basis, it generates an operating revenue of Rs. 31,903.26 Cr, demonstrating a remarkable annual revenue growth of 68%. It maintains an acceptable pre-tax margin of 7% and achieves an exceptional return on equity (ROE) of 17%. This company’s stock is, therefore, one of the most precious among Growth stocks in India.
Polycab India is a manufacturer and seller of wires and cables and fast moving electrical goods. The Company’s product line includes electric fans, LED lighting and luminaires, switches and switchgears under the ‘POLYCAB’ brand. On a trailing 12-month basis, it records an operating revenue of Rs. 15,260.60 Cr, highlighting an impressive annual revenue growth of 16%. It maintains a robust pre-tax margin of 12% and achieves an exceptional return on equity (ROE) of 19%.
Deepak Nitrite Limited is a chemical manufacturing company. The Company’s segments include Bulk Chemicals and Commodities (BCC), Fine and Speciality Chemicals (FSC), and Fluorescent Whitening Agent (FWA). On a trailing 12-month basis, it generates an operating revenue of Rs. 7,682.41 Cr, showcasing an outstanding annual revenue growth of 17%. It maintains a healthy pre-tax margin of 14% and achieves an exceptional return on equity (ROE) of 20%.
Investing in Growth Stocks via smallcase
You can also invest in a basket of high growth stocks in India via smallcase. Simply go to smallcase.com or the smallcase app, and log in via your phone number. Then, go to ‘Discover‘ and then click on ‘All smallcases‘. There you can filter the smallcases based on ‘investment strategy’ by selecting ‘growth’. You’ll find an array of stock portfolios that are based on the growth investing strategy. Just pick the one that fits your investment criterion.
Make sure that you do your diligent research before picking the right stock, keeping in mind your long-term investment goals and risk appetite.
How to invest in Growth Stocks?
Growth stocks in India can be valuable to any investment portfolio, providing diversification and potential returns.
One way to invest in growth shares in India, is through traditional stock market investing. This involves researching individual companies and buying shares of stock directly.
Another way to invest is via exchange-traded funds (ETFs). Investors can choose from various growth-oriented ETFs, which provide exposure to a diversified portfolio of growth companies.
Mutual funds are another option for investing in growth shares. These are professionally managed investment portfolios that pool money from multiple investors to buy a diversified portfolio of stocks. Like ETFs, there are a variety of mutual funds that focus on growth investing.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolio of stocks/ETFs, that are based on a theme idea or strategy.
- They’re created and managed by SEBI-registered experts,
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers.
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
How to Identify Growth Shares?
- High growth potential: Look for companies that have a history of high revenue and earnings growth.
- Strong market position: Identify companies that have a dominant position in their industry, with a strong competitive advantage.
- Innovative products/services: Look for companies that have a pipeline of innovative products or services that have the potential to disrupt their industry.
- Experienced management team: Companies with experienced and competent management teams are better positioned to navigate market challenges and drive growth.
- Large and expanding market opportunity: Identify companies that are operating in markets with significant potential for growth.
What are the Various Features of Fast Growing Shares?
- Risky investment: Growth stocks have a higher potential for future returns, but they also carry a higher risk than other investing categories like value stocks or corporate bonds. The primary threat is that the actual or anticipated growth won’t carry over into the future.
- High P/E ratio: Any sector or industry may have growth stocks, which often trade at a high price-to-earnings (P/E) ratio. They might not be making money right now, but they should in the future.
P/E ratio = market value per share / earnings per share
- High PEG ratio: Price earnings to growth ratio is a ratio that is taken into consideration to evaluate a growth stock. The key benefit of PEG ratio over P/E ratio is that it accounts for the annual increase in the overall profits per share of a company. A high PEG ratio suggests that a company has performed very well.
- High RoE: Companies in India that raise money through growth stocks often have a record annual return on total equity. Higher the RoE, more valued growth stocks.
What are the Alternate Options for Growth Stocks?
Growth stocks are highly volatile and are only meant for people with a high-risk appetite. Investors who don’t see growth stocks fit in their portfolio can look at Value stocks.
Shares of companies that are trading at a discount are known as value stocks. Value stocks often have strong dividend payout ratios and the price of the stocks is typically lower compared to other stock categories since they are undervalued.
What are the Risks of Investing in Growth Stocks?
- Volatility and risk of price fluctuations due to market conditions and changes in investor sentiment.
- Dependence on market conditions that can affect the company’s growth potential.
- Possibility of market saturation as competition increases and growth slows down.
- Risk of overvaluation, where the company’s stock price becomes detached from its fundamentals.
What are the Advantages of Investing in High Growth Stocks?
- Potential for high returns on investment as a result of the company’s strong growth trajectory.
- Diversification of portfolio with exposure to different industries and sectors.
- Protection against inflation as the company’s earnings grow over time.
- Long-term growth potential for sustained returns.
How to Build a Growth-Oriented Investment Portfolio?
- Fundamental analysis to evaluate the company’s financial health, management, and competitive advantage.
- Technical analysis to identify trends and patterns in the company’s stock price.
- Growth investing strategies that focus on high-growth companies with a long-term perspective.
- Value investing strategies that focus on undervalued companies with strong fundamentals.
To Wrap It Up…
In conclusion, investing in growth stocks can be a lucrative strategy for investors looking to maximize their returns over the long term.
With the right research and strategy, investors can potentially capitalize on the growing share price of these high growth stocks in India.
The best growth stocks in India are:
1. Jindal Stainless Ltd
2. Polycab India
3. Deepak Nitrite
You can also invest in a basket of high growth stocks in India via smallcase. Simply go to smallcase.com or the smallcase app, and log in via your phone number. Then, go to ‘Discover‘ and then click on ‘All smallcases‘. There you can filter the smallcases based on ‘investment strategy’ by selecting ‘growth’. You’ll find an array of stock portfolios that are based on the growth investing strategy.
Considering each stock individually and closely evaluating their valuations is crucial. The first half of the year has ended, bringing smiles to growth stock investors. Many of these companies, previously challenged in 2022, have not only rebounded but exceeded expectations. However you must be careful as an investor and make sure the stocks in your portfolio don’t do the opposite of grow.
Investing in growth stocks is ideal for investors seeking faster wealth growth. Those who intend to select growth stocks should possess an appetite for higher risk.
Growth stocks can offer investors the potential for very high returns, primarily through long-term capital gains. Keep in mind that such returns are not guaranteed.
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