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Shares of select smallcap firms have delivered an exponential return to investors amid the ongoing rally in the domestic equity market. It seems that investors are also shifting to the riskier names as some of the little-known stocks have gained over 1,000% during the past one year.
BSE Smallcap has outpaced the benchmarks index
The BSE Smallcap index has outpaced benchmarks by a wide margin since May last year. The index has climbed 117% to 23,596 on May 31, 2021 from 10,892 on May 29, 2020. On the other hand, the BSE Midcap gained 84%, while Sensex jumped 60%.
With a gain of 3,131%, Anjani Foods emerged as the top gainer in the smallcap space. The scrip moved to Rs 330.55 from Rs 10.23. The company is engaged in the business of manufacturing and selling of bakery and food products.
GRM Overseas (up 1,689%), Palred Technologies (up 1,345%), Hexa Tradex (up 1,341%), CG Power (up 1,335%), Tanla Platforms (up 1,223%), Shri Bajrang Alliance (up 1,118%), RRIL (up 1,086%), PG Electroplast (up 1,084%) and Intellect Design Arena (up 1,045%) stood among other major gainers among the second rung stocks.
Some of the stocks like Tanla Platforms has been around for years now. But in less than a year now, Tanla Platforms went from a tiny market cap of around Rs 500 crore to over Rs 10,000 crore. The company creates a platform (software) and sells access to enterprises. At the same time, it integrates the platform with all the major telecom operators in the country. Be it bank transactions or Facebook verification or even flight delay notifications – most of those reach you through Tanla Platforms.
Analysts bullish on smallcaps
On the other hand, analysts are bullish on some of the smallcaps in the list. For instance, brokerage Sharekhan has a ‘Buy’ rating on Intellect Design Arena with a price target of Rs 900. It believes that the company’s revenue and earnings are expected to post a 16% and 27% CAGR, respectively, over FY2021-FY2023E, led by strong traction for products across segments, new product launches, deal pipeline, and margin expansion.
Coming to other top gainers in the list, penny stocks including ARC Finance, Bihar Sponge Iron, Goyal Associates, Banas Finance and Svam Softwares have also gained between 1,000% to 2,000 during the past one year.
Commenting on the domestic equity market, G Chokkalingam, Founder, Equinomics Research and Advisory said, “Moderation in virus spread and relatively higher valuation of small and midcaps will lead to outperformance in largecap segments in the short term.”