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Big gains in small packets! Top 50 smallcaps gave multibagger returns in FY18. Do you own any?

The party in the broader market space has been continuing for the last 5 years. The S&P BSE Sensex is trading at a PE of 106.89x and a price-to-book value of 2.42.

March 27, 2018 / 04:17 PM IST

‘Multibaggers’ – the sound of it makes investors jump from their seat, and in the financial year 2018 most of them came from smallcaps. So, if you are an investor who had most of his/her portfolio in small & midcaps in the last 12 month, then chances are you are sitting on a bag full of cash.

Yes, the broader market theme did well but not every small or midcap stock gave returns. To be precise, as many as 50 stocks in the smallcap space have risen over 100 percent so far in the financial year 2018 in the S&P BSE Smallcap index and nearly 350 stocks have given negative returns of up to 90 percent.

Hence, there was plenty of movement on either side. As we step into the financial year 2019, analysts advise investors to stay invested in stocks which are showing growth momentum and have quality management.

Let’s first look at stocks which made money for investors in the S&P BSE 500 index. The list includes names like HEG, Graphite India, Venky’s India, Rain Industries, Himadari Speciality, Adani Transmission, Avanti Feeds, Saregama India, etc.

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Stocks which are priced over Rs 1,000 and have also delivered multibagger returns include Jubilant FoodWorks, TeamLease, V-Mart Retail, Lux Industries, Hester Biosciences, Shaily Engineering, Mind Industries, etc.

Among the midcap space, there were hardly any stocks which delivered multibagger returns apart from Future Retail which rose 101 percent.

Stocks which rose 50-100% include Biocon, Gillette, Vakrangee, 3M India, Divi’s Laboratories, Ashok Leyland, Tata Global Beverages, L&T Infotech, and Jindal Steel & Power.

Will the outperformance continue?

The party in the broader market space has been continuing for the last 5 years. The S&P BSE Sensex is trading at a PE of 106.89x and a price-to-book value of 2.42.

The liquidity rally which fuelled markets in the year 2017 took many small and midcap stocks higher with some registering gains of over 100 percent in just 12 months.

However, experts do not see the party continuing for the entire theme while it will now be more stock-specific which can display growth.

“We might not see the kind of outperformance which the mid-cap stocks have delivered vis-a-vis largecaps over the last 3-4 years. However, there will be certain pockets within the mid-cap segment which will outperform handsomely,” Prasanna Pathak, Fund Manager, Taurus Mutual Fund told Moneycontrol.

“If you look at the last 3-4 years, there are many midcaps and smallcap companies where prices have soared multi-folds without corresponding increase in earnings. The mid-cap/small- cap universe is 6-7 times bigger as compared to the large-cap space, which offers better stock picking opportunities even in the slightly stretched scenario,” he said.

Does this mean that investors stay away from the broader market in FY19? No. The ideas is to create a portfolio which has an ideal mix of quality small & midcaps along with largecap stocks, suggest experts.

“In most bull markets midcaps have outperformed large gaps. This is more the keys in emerging economies. Small caps have alson done well but lag midcaps overall,” Harendra Kumar, Managing Director-Institutional Equities at Elara Equities told Moneycontrol.

“So it’s a prudent strategy to have a slightly higher share in mid caps if one wants to maximize their returns,” he said.



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Kshitij Anand is the Editor Markets at Moneycontrol.
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