INDIA'S MOST WANTED SMALL CAPS

 When it comes to investing, perhaps nothing is more rewarding than spotting a promising small cap that goes on to become a mid cap and then large cap. However, this seldom happens for most investors as the small-cap segment also has a high mortality rate. Another risk is that a small cap may stay small even after many years. So, how do you hit the jackpot then?

- Karthik Anand Vijay

This month's cover story is about the most wanted small caps. These are most wanted because mutual funds and foreign institutional investors (FIIS) have both increased stakes in them over the last one year or because they are a top holding in their combined portfolio. As you may know, if the big boys of the market are bullish about a company, it's very likely that there is something special about it. So, the lists in this story can give you a head start in the quest for a small-cap bonanza.

Of course, you shouldn't blindly buy a company just because institutions are buying it or hold it. You must research it thoroughly before investing in it. Do note that the companies in this article are not our recommendations. These are intended to be used only as a starting point in your research.

HOW WE CLASSIFY SMALL CAPS

At Value Research, we have our own methodology to classify companies according to market cap. Per that methodology, small caps represent the last 10 per cent but more than the last one per cent of the total market cap. Thus, for this issue, small caps ranged from 500 crore to ₹10,000 crore. As of August 16, 2022, we had a universe of 920 companies.

SOME SMALL-CAP INSIGHTS

Before diving into lists in this story, let's take a look at how small caps have rewarded investors in the past:

Small caps that turned into large caps over the last 10 years