This trend is expected to continue with an 18% growth projected over the next two years.
In comparison, large-cap stocks are expected to see a much lower growth rate of only 8%.
“High earning growth has led to a rerating of select small-cap stocks,” Vora said.
There are approximately 4,800 small-cap companies listed in India, with the largest one with a market cap of nearly ₹35,000 crore.
Vora emphasised that smaller-sized small-cap funds, which invest in companies with relatively lower market capitalisation, often show higher growth potential.
Larger small-cap funds, on the other hand, tend to focus on the bigger names within this space.
When it comes to small-cap investing, Vora advocates for a bottom-up stock selection approach. He pointed out that high-growth sectors like asset management and allied areas—such as depositories, wealth management, broking, mutual fund distribution, and RTA agents—are emerging, offering investors a chance to tap into newly listed companies in these fields.
However, Vora cautioned that the short-term market can be volatile due to geopolitical, economic, and industry-specific factors.
“Investing should be undertaken only with a long-term view,” he said.
According to him, investors need to allow megatrends and the full potential of companies to unfold.
As for portfolio strategy, Vora recommended a balanced approach: 50% in regular income-generating, debt-oriented instruments to provide stability and predictability, 25% in mid and large caps to capture a significant share of corporate profits, and 25% in small caps to enable participation in India’s growth story.
First Published: Oct 11, 2024 3:25 PM IST