Smaller stocks in limelight; give higher returns to investors this fiscal

Smaller stocks have rewarded investors with high returns as the smallcap index jumped by 29.72 per cent so far this fiscal, outshining its bigger benchmark gauge.

An analysis of the performance of smaller stocks in the first four months of the ongoing fiscal revealed that the BSE smallcap index has zoomed 6,137.29 points or 29.72 per cent, while the midcap index has jumped 2,905.91 points or 14.39 per cent.

In comparison, the 30-share BSE benchmark Sensex has gained 3,077.69 points or 6.21 per cent.

"The sheer variety across themes and sectors aided by a low-base effect made them low hanging fruits as valuations vis-a-vis growth made a case in their favour," said S Ranganathan, Head of Research at LKP Securities.

The midcap index zoomed to its record high of 23,207.51 on July 23, and the smallcap index reached its all-time high of 26,895.93 on July 30. The BSE benchmark had reached its lifetime high of 53,290.81 on July 16.

VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services said, "Market performance has been incredible. In fact, the broader market has done much better than the benchmark indices. The outperformance is stunning, giving excellent returns to investors in the broader market."

Analysts said that pickup in economic activities and ramp-up of vaccination have also helped market rally.

Last fiscal, the BSE smallcap index zoomed 11,040.41 points or 114.89 per cent, while the midcap jumped 9,611.38 points or 90.93 per cent. In comparison, the BSE benchmark clocked 20,040.66 points or 68 per cent gain last fiscal.

According to market analysts, smaller stocks are generally bought by local investors while overseas investors focus on bluechips or large firms.

The midcap index tracks companies with a market value that is, on an average, one-fifth of bluechips or large firms. Smallcap firms are almost a tenth of that.