At a time when the BSE Smallcap index barely managed to keep its head above water in the ongoing calendar year, 11 little-known stocks rallied over 1,000 per cent on a year-to-date basis until December 5.
Kaiser Corporation had a gain of 1,981 per cent, making it the top gainer in the list. The company's shares went up to Rs 58.05 on December 5, 2022, from Rs 2.79 on December 31, 2021. Hemang Resources increased 1,725 per cent Alliance Integrated Metaliks by 1,545 per cent, S&T Corporation up 1,502 per cent KBS India up 1,258 per cent and Sonal Adhesives by 1,223 per cent. The BSE Smallcap index has gained just 2 per cent on a year-to-date basis, while the 30 per cent of BSE Sensex increased by 8 per cent during the same period. Before we go ahead, here is a disclaimer that the stocks mentioned in the article are for information purposes only.
According to Anil Rego, Fund Manager at Right Horizons, "We are still three to four quarters from small and midcaps SMIDs narrowing the valuation discount to its long-term average, as SMIDs are trading at a 25 per cent valuation discount to its long-term average.
Among the other big gainers, Gensol Engineering, RMC Switchgears, IFL Enterprises and Sejal Glass also gained 1,000 per cent during the same period.
Large caps will be dominant now, but calendar year 2023 could be the year for SMIDs to dominate its largecap peers as we gain more clarity on the interest rate trajectory, which will determine the terminal rate for the markets at large, Rego said.
Aditya Sood, Head of InCred PMS said that the earnings growth expectation for the small and midcap companies is at 20 per cent CAGR over FY 23 -- 25, which is superior to the consensus Nifty earnings expectations of 15 per cent in FY 24 and 12 per cent for FY 25, respectively. Small and mid-sized companies would bounce back strongly as the macro environment becomes more conducive. Other smallcap players like Katare Spinning Mills, Shanti Educational Initiatives, Ashnisha Industries, Madhusudan Securities, Beekay Niryat, Sadhna Broadcast CWD, Supreme Holdings Hospitality India Variman Global Enterprises, Karnavati Finance and Beekay Niryat also advanced between 500 per cent and 1,000 per cent in 2022, according to the data.
Sood thinks that the IT sector can deliver a solid return to investors going ahead. He prefers companies that are focused on engineering research and design and product companies. We like pharma companies that are focused on the production of API and have proven capability to be cost leaders and have strong research and development capabilities, Sood said.
It is important to consult a financial advisor before taking positions in penny or little-known stocks, as they are highly risky in nature. Some of the stocks, including Raghuvir Synthetics, Birla Tyres, Future Enterprises, Svarnim Trade Udyog, BFL Asset Finvest, Future Lifestyle Fashions, SM Gold and Future Retail, have gone down between 80 percent and 95 percent of their wealth in 2022 to date.