One year of lockdown: 424 small-cap stocks doubled since March last year
As many as 424 stocks of the BSE SmallCap index has swelled over 100% since March 24 last year, the day lockdown restrictions were announced.
‘Never let a good crisis go to waste’ were the wise words once said by the former Prime minister of the United Kingdom, Winston Churchill. Investors who followed this to the tee during the COVID-19 crisis and betted big on small-cap stocks have been rewarded generously. BSE SmallCap index rallied 134% from 8,877 on March 24, 2020, to 20,773 as of 23rd March 2021 while the benchmark index Sensex delivered 87.6%.
Overall, market sentiment reversed after Reliance Industries announced that Facebook will invest Rs 43,574 crore in Jio Platforms for a 9.99% stake in an all-cash deal on April 22, 2020. And multiple deals followed this announcement. Apart from this, the market remained upbeat on the back of various stimulus package announced by the government and liquidity measures taken by RBI to support. At the same time sustained inflows by foreign institutional investors, unlocking of the Indian economy, robust Q3 earnings, the launch of COVID-19 vaccine and pro-growth Budget saw a broad-based rally in the markets.
“Sustained FII inflows into Indian markets saw funds percolating to branded mid & smallcap stocks leading to a broad base rally in the BSE SmallCap index,” said Rahul Arora, CEO of Nirmal Bang Institutional Equities.
As many as 424 stocks of the BSE SmallCap index swelled over 100% since their March lows. Skyrocketing 2,135% Tanla Platforms was the top gainer of the BSE SmallCap index. The scrip has rallied from Rs 38 to 860 in the last one year. It was followed by Intellect Design Arena up 1,360%; Subex rose 1,101%; while the gas distribution business of Adani group Adani Total Gas has surged 995%.
ICICI Direct is positive on Intellect Design Arena given the healthy traction in IGCB & iSEEC is expected to drive revenues. This coupled with penetration in the US market, digital-ready product portfolio, healthy orderbook, huge addressable & underpenetrated market and improved annuity revenues are key long-term drivers of revenues. In addition, improving cash flow and deleveraged balance sheet prompt us to be positive on the stock from long term perspective.
Data further highlighted that stocks like Borosil Renewables, Godawari Power & Ispat, Ramco Systems, Balaji Amines, Neuland Laboratories and Saregama India rallied anywhere between 600-800% over the past one year.
Rajesh Agarwal, Head of Research, AUM Capital Market said, “there are huge opportunities in midcap & Smallcap stocks, where we have seen good performance in December quarter numbers. Going forward unless the Corona wave gains momentum we believe things are going to be better in the coming year. A pro-growth budget with a liberal fiscal deficit of 6.8% of GDP for FY22, announcements made regarding privatization of CPSEs, higher capex spending towards physical/social/infrastructure and manufacturing sector (PLI schemes) along with increased consumption due to pent-up demand would be huge positives.”
AUM Capital is bullish on smallcap counters like Balaji Amines, Polycab India, West Coast Paper Mills, Graphite India amongst others.
Hindustan Construction Company, Thermax, Bombay Dyeing & Manufacturing, Universal Cables, Jai Corp, Finolex Industries, Trent, Royal Orchid Hotels, Dish TV and RattanIndia Power have rallied over 100% in the last year.
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