Smallcap Surge is a newly launched strategy designed to capture undervalued, quality smallcaps in old-economy sectors. Using ~15 rules from MAGIC 2.0, it focuses on businesses with long-term PAT CAGR of 37–42%, strong ROCE CAGR (19–30%), high cash conversion, and strict valuation filters. It aims to deliver alpha from overlooked yet efficient companies.

Size & Sectors: Avg. mcap ~₹20,000-₹30,000 crore; diversified, capital-intensive

Selected Rule Highlights

1. PAT CAGR ≥ 37–42% over 12–14 years.
2. ROCE CAGR ≥ 19–30%.
3. Strict valuation discipline: Price/CFO ≤ 10–16; P/E ≤ 20–24.

Back-tested Performance Snapshot (2Yr CAGR)

1. Mean: Surge ~31% | Nifty50 ~15%
2. Median: Surge ~32% | Nifty50 ~13%
3. Downside Risk (MAR <15%): 0.10 vs 0.10 for Nifty
4. Sortino Ratio: 3.1 vs 1.5 for Nifty
5. Probability of >15% returns: 68% vs 43%

Business Quality Highlights

1. Capital Efficiency: ROCE and ROE ~20+
2. Growth: PAT 15–20%, Revenue 12–15% (1–2 yr)

Valuation: P/E ~15–20x; ~57% profit vs ~43% PE re-rating