Stocks in the stock market are often classified based on their market capitalisation as largecap, midcap, and smallcap stocks. This categorisation helps investors make informed investment decisions.
Smallcap stocks are often a popular investment choice for those seeking higher returns, as they are stocks of small companies with market capitalization generally ranging between ₹500 crores and ₹5,000 crores. Smallcap stocks are different from large-cap stocks as they have a higher potential for growth, which may offer better returns in the long run. In this blog, we will look at what smallcap stocks are, a small cap share list of the best small cap stocks India for 2024, their advantages and risks, and how to invest in them.
What are Small cap stocks?
Smallcap stocks are stocks of smallcap companies. In India, smallcap companies have a lower cap of less than ₹5,000 crores.
Smallcap stocks comprise up-and-coming young companies that are growing fast and are traded both on the BSE and the NSE. These companies have high growth potential, making them attractive investments for many investors.
Smallcap stocks are tracked by the small caps index, which comprises small cap companies in India listed on the National Stock Exchange (NSE) with a market capitalization between ₹500 crores and ₹5,000 crores. The index provides a good representation of the smallcap segment of the Indian stock market.
Best Smallcap Stocks of 2024
Discover promising investment opportunities with our carefully curated top 5 small cap stocks list for 2024 below. This small cap stocks list is meant for educational purposes only.
|Market Cap (in Cr)
|Indian Energy Exchange Ltd
|Central Depository Services (India) Ltd
|Aptus Value Housing Finance India Ltd
|Five-Star Business Finance Ltd
|ICICI Securities Ltd
|Easy Trip Planners Ltd
|Eris Lifesciences Ltd
|CE Info Systems Ltd
|Aavas Financiers Ltd
|Indiamart Intermesh Ltd
Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data in the small cap share list is from 25th January, 2024. However, for real-time updates on stock prices and market trends, visit smallcase stocks collection today!
Why Invest in Smallcap Stocks?
Investing in the top small cap stocks to buy India presents a distinctive avenue within the financial landscape. These stocks, representing small cap companies in India with smaller market capitalizations, offer unique opportunities and characteristics.
- Growth Potential: The best small cap stocks are known for their potential for rapid growth. These small cap companies in India often operate in burgeoning industries and can experience significant expansion, providing investors with an opportunity to capitalize on early-stage success.
- Market Inefficiencies: The small-cap market is less scrutinized than its larger counterparts, creating potential inefficiencies. Investors skilled at identifying undervalued gems in this space may benefit from pricing discrepancies that can arise due to lower visibility.
- Diversification: Including the top small cap stocks to buy india in a well-rounded portfolio can enhance diversification. Their performance is less correlated with large-cap stocks, providing a buffer during market fluctuations.
- Innovation and Agility: Smaller companies are often more nimble and innovative. Their ability to adapt swiftly to changing market dynamics can result in a competitive edge, fostering resilience and growth.
What are the Features of the Best Small Cap Stocks?
When evaluating the top small cap company, there are several key attributes one should keep in mind before investing in the best small cap stock. Some of them have been listed below:
- Highly Volatile: The stocks of these small cap companies in India are volatile since there is uncertainty about them becoming successful in the future.
- High Returns: Smallcap stocks can potentially typically yield high returns for any investors, especially in the shorter run.
- Low Liquidity: Top small cap stocks to buy India have the least liquidity, making squaring off positions more difficult.
Factors to Consider While Investing in Smallcap Stocks
Investing in the best small cap stocks to invest in 2024 can be rewarding, but it comes with inherent risks. Understanding key factors is crucial before diving in:
- Risk Tolerance: Small stocks to buy are known for higher volatility. Assess your risk tolerance carefully and align it with the potential fluctuations in these stocks.
- Research and Due Diligence: Thoroughly research the best small cap stocks company’s financial health, management, and growth prospects. Even the best small cap stocks for 2024 often lack analyst coverage, making individual research imperative.
- Market Conditions: Investing in small share to buy that are more susceptible to economic shifts. Consider the prevailing market conditions and how they may impact smaller companies.
- Liquidity: Due to lower trading volumes, small listed companies in India may face liquidity challenges. Assess the ease of buying or selling shares without significant price impact.
- Long-Term Perspective: Small cap investing may take time to mature. Having a long-term perspective allows you to ride out short-term fluctuations and benefit from potential growth.
- Diversification: Avoid concentrating your portfolio in small cap stocks with huge growth potential alone. Diversification spreads risk across different asset classes.
- Company Fundamentals: Focus on companies with strong fundamentals. Analyze earnings, debt levels, and competitive positioning of the best small cap share for long term to gauge stability.
Small Cap Stocks in India – Overview
Let’s have a look at the three top small stocks to buy in detail. Here is a brief overview of all the best small cap stocks to buy now that had been listed above:
Indian Energy Exchange Ltd
Indian Energy Exchange Limited (IEX), India’s primary and largest power exchange, commands a staggering 98% market share in electricity trading with over 6300 registered participants. Operating as an automated platform for electricity delivery, IEX facilitates efficient price discovery and trading in electricity contracts, Renewable Energy Certificates (RECs), and Energy Saving Certificates (ESCerts). This exchange significantly boosts accessibility and transparency in the Indian power market, elevating trade execution speed and efficiency. It is one of the best small cap stocks for 2024 on our small cap stocks list!
Central Depository Services (India) Ltd
CDSL, a prominent securities depository in India, emerged from initial promotion by BSE Ltd., subsequently divesting its stake to major banks. It enjoys connectivity with key stock exchanges like BSE Ltd., National Stock Exchange, and Metropolitan Stock Exchange of India. Offering diverse online services, including e-voting, e-Locker, National Academy Depository, easi (Electronic Access to Security Information), easiest (Electronic Access to Securities Information and Execution of Secured Transaction), and a mobile application (myeasi m-voting), CDSL stands as a crucial player in the financial landscape. It is also one of the best small cap stocks for 2024 on our small cap stocks list!
Aptus Value Housing Finance India Limited
Aptus Value Housing Finance India Limited, established on December 11, 2009, is one of the best small cap stocks for 2024 on our list. It aims to fulfill the long-term housing finance requirements of the low and middle-income demographic. The company specializes in providing loans for non-housing finance through Loan Against Properties (LAP). National Housing Bank (NHB) granted the Certificate of Registration on May 31, 2010, allowing the commencement of housing finance operations without accepting public deposits. The Registrar of Companies issued the Certificate of Commencement of Business on June 25, 2010.
Five-Star Business Finance Ltd
Five-Star Business Finance Limited was established in Chennai, Tamil Nadu, initially known as ‘Five-Star Business Credits Private Limited.’ It transitioned from a Private Limited to a Public Limited company, resulting in a name change to ‘Five-Star Business Credits Limited’ on October 3, 1988. Later, on April 12, 2016, shareholders passed a Special Resolution leading to another name change, and the company became ‘Five-Star Business Finance Limited.’ The Registrar of Companies issued a fresh Certificate of Incorporation on May 13, 2016. The company is registered with the RBI to operate as a non-banking financial institution without accepting public deposits. It is also one of the best small cap stocks for 2024 in India in our small cap stocks list.
ICICI Securities Ltd
ICICI Securities Ltd, an innovative technology-driven securities firm, provides a diverse array of financial services, encompassing retail and institutional broking, merchant banking, financial product distribution, private wealth management, and issuer and advisory services. Renowned as a trailblazer in e-brokerage, the company excels in distributing various financial products, including Mutual Funds, Exchange Traded Funds, National Pension Scheme, Sovereign Gold Bonds, RBI bonds, Corporate Fixed Deposits, REITs, as well as Protection and Loan Products.
Easy Trip Planners Ltd
Easy Trip Planners Limited officially became a Private Limited Company under the name Easy Trip Planners Private Limited in India. The transition to a Public Company occurred on April 12, 2019, leading to a change in the company’s name to Easy Trip Planners Limited. As the second-largest online travel agency in India, the company provides a comprehensive array of travel products and services, covering airline tickets, hotels, holiday packages, rail and bus tickets, taxis, and additional services like travel insurance, visa processing, as well as tickets for various activities and attractions.
Eris Lifesciences Ltd
Eris Lifesciences Limited was established and later renamed ‘Eris Lifesciences Private Limited’ on February 9, 2007. It transitioned to a Public Limited Company, adopting the name ‘Eris Lifesciences Limited’ on February 2, 2017. The company operates a pharmaceutical manufacturing plant in Guwahati, Assam, focusing on high-growth chronic, sub-chronic, and acute therapeutic areas that require specialist and super-specialist medical intervention. Eris Lifesciences boasts a portfolio of 112 Mother Brands across various therapy areas.
CE Info Systems Ltd
C.E. Info Systems Limited, originally named ‘C.E. Info Systems Private Limited,’ was incorporated in New Delhi on February 17, 1995, as a Private Limited Company. On July 7, 2021, a Special Resolution passed at the Extraordinary General Meeting led to its conversion into a Public Limited Company, and subsequently, the company’s name was changed to ‘C.E. Info Systems Limited’ on July 12, 2021.
The company specializes in data and technology products and platforms, providing proprietary digital maps through services like Maps as a Service (MaaS), Software as a Service (SaaS), and Platform as a Service (PaaS).
Aavas Financiers Ltd
Aavas Financiers Ltd., formerly Au Housing Finance Limited, operates as a Housing Finance Company registered with the National Housing Bank (NHB). Specializing in long-term financing, it targets the housing finance needs of low and middle-income segments in suburban and rural India, extending its services to metro cities and urban areas. Focusing on customers with limited access to formal banking credit, the company utilizes a distinctive appraisal approach for individual assessments, providing tailored financing solutions. Aavas Financiers offers home loans for property purchase, construction, extension, and repair, catering to diverse residential needs.
Indiamart Intermesh Ltd
IndiaMART, the largest online B2B marketplace in India, is revolutionizing the business landscape by providing advanced solutions and services. Founded in 1996 and officially established in 1999, the company has built a robust network to enhance the ease of doing business.
How to Invest in Small Cap Stocks for Long Term?
Investing in the top small cap stocks India for long term requires thorough research and analysis. The following are steps to consider when investing in the top small cap stocks to buy India:
- Research NSE small cap stocks and find potential investments. Investors can use tools like stock screeners to filter stocks by market capitalization. The CNX Smallcap Index comprises 100 tradable, exchange listed small cap companies.
- BSE also introduced a new index called ‘BSE Small-Cap’ index to track the performance of small cap companies in India with relatively smaller market capitalization.
- Analyzing financial statements and company performance. Investors should analyze financial statements (such as balance sheets) to determine the financial health of the company. This can include analyzing revenue growth, earnings growth, and debt levels.
One can buy smallcap stocks individually or buy mutual funds or exchange-traded funds (ETFs) that invest in the best small cap stocks. Funds and ETFs may occasionally own a range of equities and asset types, including small shares to buy. Other times, the funds or ETFs may only invest in a small cap share list.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios 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
Is Smallcap Stock a Good Investment?
Investments in small stocks to buy may be profitable. If an investor buys them at a good price and they have a growth potential that is greater than that of large-cap stocks or blue-chip businesses, they may experience a strong return.
Advantages of Investing in the Best Long Term Small Cap Stocks for Long Term
- Higher returns: Indian small cap stocks for 2024 India have the potential to provide higher returns than large cap stocks.
- Growth potential: Small cap companies in India have the potential to grow at a faster rate than larger companies.
- Diversification: Investing in the best small cap stocks can provide diversification benefits for a portfolio.
Compared to the small cap best stocks of larger, more established firms, small stocks to buy are riskier and more volatile, therefore investors should be extra cautious while conducting their research before making any investment decisions.
Risks associated with Small Cap Stocks
- Higher Risk: Small cap Indian companies are more likely to experience financial difficulties and may have less access to capital than larger companies.
- Limited Liquidity: The best small cap stocks may have limited trading volume, making it difficult to sell shares quickly.
- Greater Volatility: Even the small-cap stocks with huge growth potential may experience greater price fluctuations than large cap stocks.
How to Identify the Best Smallcap Stocks?
Identifying the best small cap stocks requires a nuanced approach that balances risk and potential reward. Here are key considerations:
- Company Fundamentals: Scrutinize financial health, revenue growth, and earnings consistency. Look for companies with a solid business model and a competitive edge in their industry.
- Management Team: Assess the leadership’s track record and experience. Competent and visionary management is often a positive indicator for long-term success.
- Market Trends: Analyze industry trends and the company’s position within its market. A small-cap stock with room for growth in a thriving sector may offer promising opportunities.
- Financial Ratios: Evaluate key financial ratios such as price-to-earnings (P/E), debt-to-equity (D/E), and return on equity (ROE). These metrics provide insights into a company’s financial health and valuation.
- Liquidity: Consider the stock’s liquidity to ensure easy buying and selling. Low liquidity can lead to higher volatility and challenges in executing trades.
- Macroeconomic Factors: Be mindful of broader economic conditions. Small stocks to buy can be sensitive to economic shifts, so understanding macro trends is crucial.
- Research and Analysis: Regularly conduct thorough research and stay updated on the company’s performance, industry trends, and any relevant news.
Who Should Invest in Small Cap Shares?
Investors with a high-risk appetite who want to invest in underpriced and under-recognised businesses and earn organically high returns (these returns are not influenced by larger financial institutions). Investors can get quality stocks at a fair price when they invest in small cap shares.
As always, any investor must conduct thorough research and/or consult their financial advisor before investing.
To Wrap It Up…
Investing in smallcap stocks can be a good way to diversify your portfolio and potentially achieve higher returns. However, it is important to do your research and analysis before investing in any stock, including smallcap stocks.
In conclusion, smallcap stocks are a segment of the Indian stock market that comprises small-cap companies with high growth potential. Investing in smallcap stocks can diversify an investor’s portfolio and potentially higher returns. However, smallcap stocks also carry higher risks, and it is important for investors to conduct thorough research and analysis before investing in them.
The NIFTY Smallcap 100 Index aims to mirror the performance and actions of the small-cap segment within the financial market. It consists of 100 publicly listed, tradable companies on the exchange.
The Nippon India Nifty Smallcap 250 Index Fund – Regular Plan is required to maintain a minimum of 65 percent of its assets in small stocks to buy consistently.
Here are the best small-cap stocks to buy in 2024 among the top 10 small cap stocks – Indian Energy Exchange Ltd, Central Depository Services (India) Ltd and Note: This small cap share list is for educational purposes only, and is not recommendatory.
You can invest in the top small-cap stocks in India through a stockbroker or by investing in a smallcap mutual fund.
Here are the steps involved:
1. Open a trading account with a stockbroker.
2. Do your research and select the smallcap stocks you want to invest in.
3. Place a buy order for the stocks you have selected.
4. Monitor your investments and make adjustments as needed.
If you’re willing to invest in the best small cap shares for long term for about 7 to 10 years, then investing in smallcap IT stocks is a good investment. However, one must evaluate their investment goals and risk appetite before investing.
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