When Small is Big

Based on the experience of the last couple of years, countries as well as businesses are taking a fresh look at the way they interact globally. The reasons for such a change are the two black swan events during this period.First, it was the pandemic that shocked the enterprises and woke them up to how ill-prepared they were to face the logistic challenges posed by the lockdowns. It is estimated that shutting down of the economic activity due to the pandemic knocked down global growth by almost 3 per cent. Thanks to the synchronised action taken by central banks and governments, the global economy recovered fast but began to falter again in the wake of the conflict between Russia and Ukraine.

This event has catapulted inflation into a higher orbit, triggering a slew of rate hikes by almost all major central banks and putting economic growth into jeopardy. The long-term consequences of the above two events are leading most economies to keep manufacturing and many services closer to home. We have already seen the steps taken by the Government of India in the form of pushing the package of self-reliance and promoting industry through the production linked incentive (PLI) scheme. This tectonic shift will create a long-term investment opportunity. The market will gradually acknowledge the likely impact of this highly consequential shift.

Among others, I believe it will have the biggest positive impact on small-cap stocks as they will be the prime beneficiaries of such incentive schemes. There are other short-term factors that I see helping these small-cap companies. First, the latest GDP growth numbers are encouraging. They are not as bad as many economists had predicted. The monsoon is once again expected to be normal for this year and in April the eight core sector industries posted a growth number that has beaten all the consensus polls and is way above the March number.

The current issue, also one of the most awaited one, is a ‘small-cap special issue’ where we bring to you the most relevant and updated data on the fundamentals of the most thriving small-cap companies in India. In this special issue we are giving you a list of small-cap stocks under different categories which can be a starting point for your final selection of small-cap stocks to invest in. The global money market may find Indian equities more attractive than the rest of the world for what remains of this year. The resilient performance of the Indian equity markets has surprised market participants so far in 2022. There is a huge amount of wealth-creation opportunity in the broader markets.

The focus should be on those capable small-cap companies looking to top the above average growth opportunity presented in the respective industry. Quality management in small-cap companies is very crucial to identify along with the growth triggers faced by the small-cap companies and the industry in which they operate. There are more than 4,500 small-caps available on the BSE platform to choose from. It would be wise to not spend time on studying a majority of these stocks as that would be an impractical task and not too fruitful. Rather, you can take advantage of our large research team, years of market experience and resources to capitalise on some top-class small-cap investment ideas. Stay tuned as we unfold more of such insights.

RAJESH V PADODE
Managing Director & Editor