Last Updated on Oct 4, 2024 by Aishika Banerjee
Small-cap stocks, categorised by a market capitalisation under Rs. 5,000 cr., present unique opportunities and challenges for investors. These stocks, ranking 251 and above in the market, are often associated with higher growth potential and the possibility of significant returns. However, they also tend to be more volatile and less liquid. In this concise guide, we explore the features, advantages, and disadvantages of small-cap stocks, offering practical insights for investors looking to navigate this segment of the market. Further, we have listed small-cap stocks with huge growth potential, fundamentally strong small-cap stocks, and the ones based on their 1-yr return. Whether you’re assessing risk tolerance or seeking long-term growth, understanding the basics of small-cap stocks is essential for informed investment decisions.
Table of Contents
Top 10 Small Cap Stocks for Long Term (2024)
| Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | PE Ratio | 5Y Avg Net Profit Margin (%) | 5Y Historical Revenue Growth (%) | Return on Equity (%) | 1Y Forward EPS Growth (%) |
| Indian Energy Exchange Ltd | Power Trading & Consultancy | 18,558.24 | 208.99 | 52.90 | 61.01 | 13.81 | 39.61 | 14.07 |
| Central Depository Services (India) Ltd | Stock Exchanges & Ratings | 30,025.99 | 1,415.30 | 71.64 | 45.87 | 29.89 | 30.32 | 26.41 |
| Aptus Value Housing Finance India Ltd | Home Financing | 17,590.52 | 340.45 | 28.75 | 42.49 | 33.16 | 17.22 | 22.20 |
| Five-Star Business Finance Ltd | Consumer Finance | 24,181.33 | 818.05 | 28.93 | 36.22 | 40.37 | 17.53 | 29.90 |
| Clean Science and Technology Ltd | Specialty Chemicals | 17,318.06 | 1,594.25 | 70.97 | 32.23 | 15.53 | 22.05 | 24.74 |
| Suven Pharmaceuticals Ltd | Pharmaceuticals | 30,615.25 | 1,194.25 | 101.96 | 31.34 | 24.09 | 15.86 | 13.60 |
| CE Info Systems Ltd | Software Services | 11,966.59 | 2,146.85 | 89.33 | 29.46 | 20.65 | 22.29 | 29.04 |
| Computer Age Management Services Ltd | Diversified Financials | 22,572.58 | 4,422.40 | 63.83 | 28.26 | 10.58 | 41.65 | 29.59 |
| Indiamart Intermesh Ltd | Online Services | 17,967.56 | 2,913.10 | 53.80 | 28.06 | 20.74 | 17.60 | 29.64 |
| Aavas Financiers Ltd | Home Financing | 14,645.94 | 1,778.40 | 29.85 | 26.37 | 23.23 | 13.93 | 19.28 |
Note: The data in this small cap stocks list is from 3rd October 2024. The best small cap stocks for long term are filtered using Tickertape Stock Screener using the following parameters:
- Stock Universe: Nifty 500
- Market Cap: Small-cap
- 5Y Average Net Profit Margin: Set the limit to 5 to High (Sorted from highest to lowest)
- 5Y Historical Revenue Growth: Set the limit to 10 to High
- Return on Equity: Set the limit to 10 to High
- 1Y Forward EPS Growth: Set the limit to 10 to High
🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.
How to Invest in SmallCap Stocks with smallcase?
Find out how you can easily invest in smallcap stocks through professionally managed portfolios on smallcase.
But first, let’s explain what smallcase is all about.
What is a smallcase?
smallcases are modern investment products that help investors build low-cost, long-term & diversified portfolios with ease. A smallcase is a basket or portfolio of stocks/ETFs representing an idea – an objective, theme, or strategy. They are created and managed by SEBI-registered experts.
Among 500+ smallcases, here’s a smallcase that is focused on small cap companies:
Note: These smallcases are mentioned only for educational purposes and are not meant to be recommendatory. Investors must conduct their own research and consult a financial expert before making any investment decisions.
- Disclosure for Mi25 Smallcap
- Disclosure for Wright 🌱 Smallcaps
Overview of the Best Small Cap Stocks For 2024
Indian Energy Exchange Ltd
Indian Energy Exchange Ltd (IEX) was incorporated in 2007 and is India’s first and largest energy exchange, facilitating the trading of electricity, renewable energy certificates, and energy-saving certificates. It plays a critical role in providing a transparent and efficient platform for power trading.
The company has a market capitalisation of Rs. 18,558.24 cr., and a closing price of Rs. 208.99. Its PE ratio is 52.90. The 5-yr average net profit margin is 61.01%, with a 5-yr historical revenue growth of 13.81%. The return on equity is 39.61%, and the 1-yr forward EPS growth is 14.07%.
Central Depository Services (India) Ltd
Central Depository Services (India) Ltd (CDSL) was established in 1999 as a depository in India, providing services related to the dematerialisation of securities, e-voting, and other investor services. It is one of the key players in India’s financial market infrastructure.
CDSL’s market capitalisation is Rs. 30,025.99 cr., with a closing price of Rs. 1,415.30. The PE ratio is 71.64. The company has a 5-yr average net profit margin of 45.87%, 5-yr historical revenue growth of 29.89%, a return on equity of 30.32%, and a 1-yr forward EPS growth of 26.41%.
Aptus Value Housing Finance India Ltd
Aptus Value Housing Finance India Ltd was founded in 2009 and operates in the home financing sector, focusing on providing housing loans to the self-employed and informal income segment in India. The company specialises in affordable housing finance.
The market capitalisation of Aptus Value Housing Finance India Ltd is Rs. 17,590.52 cr., with a closing price of Rs. 340.45. The PE ratio is 28.75. The company’s 5-yr average net profit margin is 42.49%, with historical revenue growth of 33.16%. The return on equity is 17.22%, and the 1-yr forward EPS growth is 22.20%.
Five-Star Business Finance Ltd
Five-Star Business Finance Ltd was founded in 1984 and is engaged in providing secured business loans to micro-entrepreneurs and self-employed individuals, focusing on underserved markets in India.
The market capitalisation of Five-Star Business Finance Ltd is Rs. 24,181.33 cr., with a closing price of Rs. 818.05. It has a PE ratio of 28.93. The 5-yr average net profit margin is 36.22%, with a 5-yr historical revenue growth of 40.37%. The company’s return on equity is 17.53%, and the 1-yr forward EPS growth is 29.90%.
Clean Science and Technology Ltd
Clean Science and Technology Ltd was incorporated in 2003 and specialises in developing and manufacturing speciality chemicals used in various industries, including pharmaceuticals, agrochemicals, and personal care.
The company has a market capitalisation of Rs. 17,318.06 cr., with a closing price of Rs. 1,594.25. The PE ratio of the company is 70.97. Its 5-yr average net profit margin is 32.23%, with historical revenue growth of 15.53%. The return on equity is 22.05%, and the 1-yr forward EPS growth is 24.74%.
Suven Pharmaceuticals Ltd
Suven Pharmaceuticals Ltd was established in 2018 and operates in the pharmaceuticals sector, focusing on contract development, manufacturing, and active pharmaceutical ingredients (APIs). The company is a key player in providing custom synthesis to global pharmaceutical companies.
The market capitalisation of Suven Pharmaceuticals Ltd is Rs. 30,615.25 cr., with a closing price of Rs. 1,194.25. It has a PE ratio of 101.96. The 5-yr average net profit margin is 31.34%, with historical revenue growth of 24.09%. The return on equity is 15.86%, and the 1-yr forward EPS growth is 13.60%.
CE Info Systems Ltd
CE Info Systems Ltd, commonly known as MapmyIndia, was founded in 1995 and is involved in providing digital maps, geospatial software, and location-based services in India. The company caters to a wide range of sectors including automotive, government, and corporate.
CE Info Systems Ltd has a market capitalisation of Rs. 11,966.59 cr., with a closing price of Rs. 2,146.85. The PE ratio is 89.33. Its 5-yr average net profit margin is 29.46%, historical revenue growth is 20.65%, the return on equity is 22.29%, and the 1-yr forward EPS growth is 29.04%.
Computer Age Management Services Ltd
Computer Age Management Services Ltd (CAMS), established in 1988, is a leading provider of mutual fund transfer agency services. It offers a range of services to mutual funds, insurance companies, and other financial institutions.
CAMS has a market capitalisation of Rs. 22,572.58 cr., with a closing price of Rs. 4,422.40. The company’s PE ratio is 63.83. The company has a 5-yr average net profit margin of 28.26%, historical revenue growth of 10.58%, a return on equity of 41.65%, and a 1-yr forward EPS growth of 29.59%.
Indiamart Intermesh Ltd
Indiamart Intermesh Limited became a public limited company on 13th September 1999. It connects buyers and suppliers across various product categories and regions in India. Serving as an e-marketplace for business needs, this small cap company facilitates interactions between domestic and international buyers and suppliers.
Indiamart Intermesh Ltd has a market capitalisation of Rs. 17,967.56 cr., with a closing price of Rs. 2,913.10. The company’s PE ratio is 53.80. The company has a 5-yr average net profit margin of 28.06%, historical revenue growth of 20.74%, a return on equity of 17.60%, and a 1-yr forward EPS growth of 29.64%.
Aavas Financiers Ltd
Aavas Financiers Ltd. is a Housing Finance Company (HFC) registered with the National Housing Bank (NHB). It focuses on providing long-term housing finance in domestic markets, catering to the growing needs of low and middle-income customers in suburban and rural India, as well as those in metro cities and urban regions.
Aavas Financiers has a market capitalisation of Rs. 14,645.94 cr., with a closing price of Rs. 1,778.40. The company’s PE ratio is 29.85. The company has a 5-yr average net profit margin of 26.37%, historical revenue growth of 23.23%, a return on equity of 13.93%, and a 1-yr forward EPS growth of 19.28%.
Fundamentally Strong Smallcap Stocks
| Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | PE Ratio | Net Income (Rs. in cr.) | Return on Equity (%) | Debt to Equity 9%) |
| Sun Tv Network Ltd | TV Channels & Broadcasters | 33,483.40 | 821.05 | 17.39 | 1,925.07 | 19.43 | 0.00 |
| Vedant Fashions Ltd | Textiles | 32,974.81 | 1,301.25 | 79.62 | 414.17 | 27.60 | 0.28 |
| Himadri Speciality Chemical Ltd | Commodity Chemicals | 32,956.49 | 644.35 | 80.23 | 410.76 | 15.44 | 0.20 |
| Emami Ltd | FMCG – Personal Products | 32,896.82 | 744.45 | 45.47 | 723.51 | 30.33 | 0.04 |
| KPR Mill Ltd | Textiles | 32,839.78 | 941.70 | 40.78 | 805.35 | 19.97 | 0.27 |
| NBCC (India) Ltd | Construction & Engineering | 32,434.20 | 170.57 | 80.77 | 401.57 | 17.70 | 0.00 |
| Mangalore Refinery and Petrochemicals Ltd | Oil & Gas – Refining & Marketing | 31,704.51 | 177.80 | 8.81 | 3,597.05 | 31.08 | 0.96 |
| Poonawalla Fincorp Ltd | Consumer Finance | 31,179.65 | 393.35 | 18.53 | 1,682.75 | 22.38 | 1.86 |
| Motherson Sumi Wiring India Ltd | Cables | 31,027.34 | 68.24 | 48.61 | 638.30 | 42.45 | 0.15 |
| Suven Pharmaceuticals Ltd | Pharmaceuticals | 30,615.25 | 1,194.25 | 101.96 | 300.27 | 15.86 | 0.03 |
Note: The information on this small cap share list is dated 3rd October 2024. We have listed the top 10 fundamentally strong small-cap stocks from Tickertape Stock Screener based on the following parameters:
- Stock Universe: Nifty 500
- Market Cap: Small-cap
- Net income: Set to Positive – Set the lower limit to zero
- Return on equity: Set to high
- Debt-to-equity ratio: Set to Low
Top 10 Small-Cap Stocks – Based on 1-Yr Return
| Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | PE Ratio | 1Y Return (%) |
| Inox Wind Ltd | Heavy Electrical Equipments | 31,195.88 | 229.96 | -771.41 | 378.46 |
| Signatureglobal (India) Ltd | Real Estate | 22,702.20 | 1,612.90 | 1404.84 | 238.28 |
| Anant Raj Ltd | Real Estate | 24,875.97 | 727.60 | 95.35 | 228.04 |
| PCBL Ltd | Commodity Chemicals | 21,560.66 | 555.15 | 43.92 | 208.33 |
| Techno Electric & Engineering Company Ltd | Construction & Engineering | 18,309.62 | 1,557.05 | 68.20 | 206.54 |
| Newgen Software Technologies Ltd | Software Services | 18,444.95 | 1,308.60 | 73.31 | 196.95 |
| Multi Commodity Exchange of India Ltd | Stock Exchanges & Ratings | 29,720.58 | 5,784.70 | 357.61 | 195.64 |
| NBCC (India) Ltd | Construction & Engineering | 32,434.20 | 170.57 | 80.77 | 192.57 |
| Netweb Technologies India Ltd | IT Services & Consulting | 14,140.74 | 2,396.20 | 186.28 | 188.61 |
| Sobha Ltd | Real Estate | 21,264.41 | 1,822.80 | 433.00 | 168.67 |
Note: The information on this list of top small cap stocks is dated 3rd October 2024. We have listed the top 10 small-cap stocks to buy in India from Tickertape Stock Screener based on the following parameters:
- Stock Universe: Nifty 500
- Market Cap: Small-cap
- 1Y Return: Set to high (Sort from highest to lowest)
What are Small-Cap Stocks?
Technically, small-cap stocks belong to companies that have a market capitalisation under Rs. 5,000 cr. In other words, shares of small-cap companies are called small-cap stocks.
Since these have scope for high growth, small-cap stocks are known to give higher returns compared to mid and large-cap stocks. However, it is also true that in a falling market, these stocks are impacted the most and, thus, become highly volatile.
Features of Small-Cap Stocks
- Small cap companies in India are ranked 251 and above in terms of market capitalisation.
- Small-cap stocks are relatively new businesses compared to mid and small-cap entities.
- Small-cap stocks have the potential for high growth, which means the possibility of yielding high returns to their stockholders is also high.
- Small-cap stocks can be great wealth generators when held for the long term.
- Some small caps can be multibagger stocks if they generate very high returns.
- Small-cap stocks are highly volatile as they are the most impacted in a bear market or downtrend.
- Small-cap companies may have lower revenue and cash flow compared to others.
- Prices of some small-cap stocks may be undervalued because they may not be as recognised as their counterparts.
- Small-caps that do well over time become mid and large-cap stocks.
- Small-cap stocks are the least liquid stocks as they are not well recognised and are traded less often.
What is the Small-Cap Stock Index?
The market has benchmark small-cap indices that track the performance of small-cap stocks in the Indian stock market.
Who Should Invest in Small-Cap Stocks?
Due to the associated high risk, small-cap stocks are well suited for investors with a high tolerance for risk. However, any stock market investor can include small-cap stocks in their portfolio for diversification purposes. But bear in mind that keeping a long-term investment horizon is necessary.
Factors to Consider While Analysing Small-Cap Stocks
If you are thinking of investing in small-cap stocks, you need to consider the following factors:
- Company’s Management: Irrespective of the company’s size, you may need to look into the top management, such as the CEO, CFO, and other key executives. Check if they have successfully managed businesses before. One tip would be to see if the top management holds shares in the company, as this may indicate that they trust their business and are committed to its success.
- Company Growth: Analyzing a company’s growth involves checking its earnings and cash position. While small-cap companies often have limited cash flow, you should look for good annual revenue and positive operating margins, which may indicate the company’s ability to turn sales into profits. Remember that small-cap companies might operate at a loss initially, so assessing their long-term growth potential is crucial.
- Financial Ratios: To understand the company’s financial health, You can evaluate key ratios like Debt-to-Equity, Return on Equity (ROE), and Profit Margins. These ratios can provide insights into operational efficiency, which is vital when selecting the best small-cap stocks.
- Competitive Advantage: Check if the company has a clear competitive edge or unique positioning within its industry. Small-cap stocks with strong market positioning often show better growth potential.
- Market Position: Consider how well the company is positioned in its market segment. Companies listed in the Sensex small-cap index or included in a reputed small-cap stocks list often have proven business models.
Advantages of Small-Cap Stocks
- High Growth Potential: Small-cap stocks often have high growth potential compared to large-cap stocks. Many experts suggest that the best small-cap stocks can perform well in the long term.
- Fairly Priced: As domestic and foreign institutional investors (DIIs and FIIs) often focus on large-cap stocks, small-cap stocks remain fairly priced, allowing retail investors to find value opportunities.
- Diversification: Investing in small-cap stocks or the top small-cap mutual funds can diversify your portfolio, reducing dependence on large-cap stocks.
Disadvantages of Small-Cap Stocks
- Liquidity Issues: Due to lower investor interest, even the best small cap shares can be challenging to buy or sell quickly, which can affect your ability to exit positions when needed.
- Higher Risk: Even the best small cap stocks to buy are more volatile and susceptible to market changes than large-cap stocks. You can manage this risk through proper diversification and portfolio management.
- Limited Access to Capital: Small-cap companies often need help accessing capital, which can limit their ability to expand or survive during economic downturns.
Investing in small-cap stocks can offer substantial rewards, but you should carefully analyse the fundamentals and consider both the advantages and risks involved.
Is It Worth Having Small-Cap Stocks in Your Portfolio?
Small-cap stocks can provide an investor with an opportunity to earn good returns on their investments. At the time of economic recovery or growth, actively managed small-cap stocks can outperform other stocks in the market. However, it is important to note that small-cap stocks are considered risky compared to mid-cap or large-cap stocks. Hence, evaluate your risk appetite and the sectors that have good potential to perform during uncertain times while choosing small cap stocks to buy today.
To Conclude
Investing in small-cap stocks can be a rewarding journey, offering high growth potential and portfolio diversification. These stocks often represent companies with strong management, innovative business models, and a competitive edge, making them attractive to investors. However, small-cap stocks come with their own set of challenges, such as higher volatility, lower liquidity, and increased sensitivity to market conditions. By carefully analysing key factors like financial health, growth prospects, and market positioning, you can identify the best small-cap stocks that align with your goals. With thorough research and the right strategy, small-cap stocks can add significant value to your investment portfolio over the long term.
Frequently Asked Questions on Small Cap Stocks
1. What is a small cap company?
A small cap is a type of market capitalisation of a company. A company with a market capitalisation lower than Rs. 5000 cr. is a small cap company. The other categories are mid and large-cap.
2. What is a small cap stock?
Shares of companies having a market capitalisation of less than Rs. 5,000 cr. are small-cap stocks. In other words, these are issued by small-cap companies in India. These are ranked 251 and above in the stock market.
3. How to find good small cap stocks?
One of the easiest, quickest, and simplest ways to find small-cap stocks is using Tickertape. Using its intuitive Stock Screener, which is built with over 200+ filters, you can get a list of NSE small-cap stocks based on your desired parameters. All you have to do is launch the Tickertape Stock Screener and add your desired filters, such as total debt, net profit margin, and so on. There you go, you have a list of small-cap stocks in India in no time! What’s more, you can add multiple small-cap shares to your Basket and buy/sell them at once using the Transactions feature.
4. What are the best small-cap stocks to buy today?
You can use Tickertape’s Stock Screener to filter the best small-cap stocks based on parameters that matter to you. Once you get a list of small-cap companies in India, use Tickertape’s Stock Pages to analyse individual stocks in order to make well-informed investment decisions.
5. What are the risks of investing in small-cap stocks?
Small-cap companies that issue such shares are relatively newer than mid-cap and large-cap entities. Although they have greater growth potential and are likely to offer better returns in the long term, they lack ample financial resources and efficient managerial skills like those of large-cap companies. This puts them at risk in a falling market, making them highly risky.
6. What are the benefits of investing in small-cap stocks?
Although small-cap stocks are risky, they have the potential to yield high returns. This makes them suitable investments for aggressive investors. When invested for long, small-cap shares can help accumulate wealth.
7. How to get the list of small-cap stocks in NSE?
You can get the list of small-cap stocks in NSE easily on Tickertape by following the steps below:
– Login to Tickertape
– Go to Stock Screener
– Select ‘Smallcap’ under the ‘Market Cap’
Find the list of all small-cap stocks listed in the NSE.
8. How to get the list of small-cap IT stocks?
You can get the list of small-cap IT stocks on Tickertape with just two clicks. Follow the steps below:
– Login to Tickertape
– Go to Stock Screener
– Select ‘Smallcap’ under the ‘Market Cap’
– Under the ‘Sector’ select ‘Information Technology’
9. How to get debt-free small-cap stocks in India?
You can get the list of debt-free small-cap stocks in India by following the steps below:
– Login to Tickertape
– Go to Stock Screener
– Select ‘Smallcap’ under the ‘Market Cap’
– Click on ‘Add Filter’
– Search for ‘Total Debt’
– Sort the ‘Total Debt’ from low to high and get the list of small-cap stocks with no debts.
10. What are the top small-cap stocks to buy in India?
According to the highest to lowest 1-yr return, these are the top 10 small-cap stocks –
1. Inox Wind Ltd
2. Signatureglobal (India) Ltd
3. Anant Raj Ltd
4. PCBL Ltd
5. Techno Electric & Engineering Company Ltd
6. Newgen Software Technologies Ltd
7. Multi Commodity Exchange of India Ltd
8. NBCC (India) Ltd
9. Netweb Technologies India Ltd
10. Sobha Ltd
Note: The data is dated 3rd October 2024.
Discover Related Stock Collections
Check out our other stock collections that may be of interest to you:
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
