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Economic Times
3 days ago
- Business
- Economic Times
Smallcap mania is back. But do Q4 earnings really justify the multibagger hype?
A blistering rally in smallcap stocks is reigniting investor dreams of overnight riches but the numbers are telling a far more complicated story. With the BSE Smallcap Index up nearly 10% in one month, retail participation is surging, echoing the speculative fervor of the last bull market that climaxed in September 2024. And the excitement isn't just index-level: in the last one month, a staggering 69 smallcap stocks have delivered over 30% returns. Among the biggest gainers, Suven Life Sciences surged 83%, while GRSE, Timex, IFCI, Nelcast, and HLE Glascoat all rallied at least 50%. ADVERTISEMENT But while prices soar, fundamentals remain shaky and earnings aren't keeping pace with the hype. 'Indian smallcaps and midcaps seem to have outperformed largecaps in Q4 FY25, but the numbers tell a different story,' said Akshay Badjate, Fund Manager at Merisis PMS. 'Our analysis of the top 750 listed companies shows smallcaps lagging in profit growth, with a median PBT growth of just 4% compared to 11% for the top 250 largecaps. Many smallcaps even posted flat or negative growth, undermining the narrative of a broad-based rally.' Despite the tepid performance on the bottom line, investor appetite has remained insatiable. The Nifty Smallcap 250 has rallied 9% in the last two months, triple the 3% rise seen in the Nifty 50. Badjate attributes this surge to 'liquidity, retail enthusiasm, and domestic growth optimism,' but warns that the disconnect between price and performance may not be sustainable.'Our view at Merisis Advisors is cautious,' he said. 'While select smallcaps with strong fundamentals remain appealing, the segment risks a correction if earnings don't align with valuations. We're trimming smallcap exposure and leaning into largecaps and large midcaps, where we see better operational momentum and value.' Also read | Rs 7 lakh crore boom in just 10 days! Is the smallcap stocks party getting out of hand? ADVERTISEMENT Q4 did deliver a few bright spots for the broader market. 'The Nifty Midcap 150 reported 15% YoY profit growth and the Smallcap 250 delivered 12%. Margin performance was largely stable in midcaps, though smallcaps saw some pressure,' said Krishna Appala, Fund Manager at Capitalmind Appala also flagged that the earnings catch-up story has its limits. 'Valuations remain stretched — midcaps trade at 34x and smallcaps at 32x trailing earnings, well above the 22x seen in largecaps. The divergence between earnings and valuations in the broader market calls for greater selectivity.' ADVERTISEMENT He further added that while largecaps may appear sluggish, they now offer a better risk-reward profile. 'Despite the sharp upmove recently, largecaps currently offer a better balance of earnings visibility and valuation comfort on a forward-looking basis. The environment today rewards fundamentals and discipline over broad-based exposure — especially when mid and smallcap multiples leave little room for error.'Still, not all fund managers are ready to write off smallcaps just yet. Vaibhav Chugh, Director and Head of Sales at Whiteoak Capital AMC, sees rich opportunity in the chaos — provided investors pick wisely. ADVERTISEMENT 'Yes, the result season started slow but as it progressed, midcaps and smallcaps have surprised on growth trajectory as well as upgrades to downgrades statistics,' Chugh said. 'We continue to be overweight small caps. We find relatively high alpha opportunities due to the heterogeneity of business models, sectors and sub-sectors in the smallcap space — which is the ideal setup for bottom-up stock pickers.' With nearly 70 smallcap names delivering eye-popping returns in a matter of weeks, the lure of the next multibagger is proving hard to resist. But experts caution that investors need to tread carefully — the fundamentals are not as broad-based as the rally suggests, and elevated valuations leave little room for disappointment. The smallcap story is far from over, but chasing momentum without earnings to back it could lead to painful lessons. Also read | Sensex soars 10,000 points from April lows. But India Inc's Q4 numbers expose cracks in market rally (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Time of India
3 days ago
- Business
- Time of India
Smallcap mania is back. But do Q4 earnings really justify the multibagger hype?
A smallcap rally is exciting investors, with the BSE Smallcap Index rising nearly 10% in a month and many stocks delivering over 30% returns. However, earnings growth lags behind, with smallcaps showing lower profit growth compared to largecaps. Experts advise caution, suggesting a focus on fundamentals and a potential shift towards largecaps due to stretched valuations in the smallcap segment. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads A blistering rally in smallcap stocks is reigniting investor dreams of overnight riches but the numbers are telling a far more complicated story. With the BSE Smallcap Index up nearly 10% in one month, retail participation is surging, echoing the speculative fervor of the last bull market that climaxed in September 2024. And the excitement isn't just index-level: in the last one month, a staggering 69 smallcap stocks have delivered over 30% returns. Among the biggest gainers, Suven Life Sciences surged 83%, while GRSE Nelcast , and HLE Glascoat all rallied at least 50%.But while prices soar, fundamentals remain shaky and earnings aren't keeping pace with the hype.'Indian smallcaps and midcaps seem to have outperformed largecaps in Q4 FY25, but the numbers tell a different story,' said Akshay Badjate, Fund Manager at Merisis PMS. 'Our analysis of the top 750 listed companies shows smallcaps lagging in profit growth, with a median PBT growth of just 4% compared to 11% for the top 250 largecaps. Many smallcaps even posted flat or negative growth, undermining the narrative of a broad-based rally.'Despite the tepid performance on the bottom line, investor appetite has remained insatiable. The Nifty Smallcap 250 has rallied 9% in the last two months, triple the 3% rise seen in the Nifty 50. Badjate attributes this surge to 'liquidity, retail enthusiasm, and domestic growth optimism,' but warns that the disconnect between price and performance may not be sustainable.'Our view at Merisis Advisors is cautious,' he said. 'While select smallcaps with strong fundamentals remain appealing, the segment risks a correction if earnings don't align with valuations. We're trimming smallcap exposure and leaning into largecaps and large midcaps, where we see better operational momentum and value.'Q4 did deliver a few bright spots for the broader market. 'The Nifty Midcap 150 reported 15% YoY profit growth and the Smallcap 250 delivered 12%. Margin performance was largely stable in midcaps, though smallcaps saw some pressure,' said Krishna Appala, Fund Manager at Capitalmind Appala also flagged that the earnings catch-up story has its limits. 'Valuations remain stretched — midcaps trade at 34x and smallcaps at 32x trailing earnings, well above the 22x seen in largecaps. The divergence between earnings and valuations in the broader market calls for greater selectivity.'He further added that while largecaps may appear sluggish, they now offer a better risk-reward profile. 'Despite the sharp upmove recently, largecaps currently offer a better balance of earnings visibility and valuation comfort on a forward-looking basis. The environment today rewards fundamentals and discipline over broad-based exposure — especially when mid and smallcap multiples leave little room for error.'Still, not all fund managers are ready to write off smallcaps just yet. Vaibhav Chugh, Director and Head of Sales at Whiteoak Capital AMC, sees rich opportunity in the chaos — provided investors pick wisely.'Yes, the result season started slow but as it progressed, midcaps and smallcaps have surprised on growth trajectory as well as upgrades to downgrades statistics,' Chugh said. 'We continue to be overweight small caps. We find relatively high alpha opportunities due to the heterogeneity of business models, sectors and sub-sectors in the smallcap space — which is the ideal setup for bottom-up stock pickers.'With nearly 70 smallcap names delivering eye-popping returns in a matter of weeks, the lure of the next multibagger is proving hard to resist. But experts caution that investors need to tread carefully — the fundamentals are not as broad-based as the rally suggests, and elevated valuations leave little room for disappointment. The smallcap story is far from over, but chasing momentum without earnings to back it could lead to painful lessons.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Mint
3 days ago
- Business
- Mint
BSE Midcap, Smallcap indices surge up to 10% this month, outshining Nifty 50, Sensex; is a stock market bubble brewing?
The Indian stock market looks set to extend its winning streak to the third consecutive session in May, helped by easing tariff worries, improving macroeconomic conditions, largely stable Q4 results, and foreign capital inflow. While the market is witnessing buying across segments, barring intermittent profit booking, a notable fact is the significant outperformance of broader markets. In May till the 28th, the benchmark Sensex has gained over 1 per cent and the Nifty 50 has climbed almost 2 per cent. However, the broader markets have outperformed significantly, with an over 5 per cent gain in the BSE Midcap index and a 10 per cent gain in the BSE Smallcap index. Some small-cap stocks such as Suven Life Sciences and Cosmo First have surged more than 80 per cent in the last one month. The sharp gains in the mid- and small-cap segments this month could be attributed to better-than-estimated Q4 earnings and moderation in premium valuation. Easing global risks, the prospects of healthy economic growth, an above-normal monsoon, and the RBI's rate cuts are also among key factors that seem to have boosted the broader market sentiment. Moreover, experts suggest that retail investors, in the pursuit of quick gains, could be chasing mid and small-caps after their underperformance over the last few months. Year-to-date, the Sensex and the Nifty 50 have gained 4 per cent and 5 per cent, respectively, while the BSE Midcap index has declined 3 per cent and the BSE Smallcap index has suffered a loss of 5.5 per cent. "The outperformance in mid- and small-caps this May is a mix of factors, including geopolitical tensions like the India-Pak war scare that have eased, US tariff rhetoric that has softened, the monsoon forecast and the above-expectations Q4 earnings. All of this has improved sentiment toward India's domestic story," Trivesh, COO, Tradejini, observed. Trivesh underscored that the pharma and FMCG have seen renewed interest due to rising income levels and steady rural demand, while niche mid-cap names in capital goods, chemicals, and auto ancillaries continue to offer structural opportunities. Shrikant Chouhan, the head of equity research at Kotak Securities, underscored that the Nifty 50 is trading at 19 times the one-year forward earnings for FY27, which is expensive. However, the market appears to be relatively relaxed despite uncertainties in global macroeconomic conditions. "In such situations, it is common for activity to shift toward mid and small-cap stocks. Our strategy should focus on a bottom-up approach," said Chouhan. According to Pawan Bharaddia, the co-founder of Equitree Capital, the crux of this rebound in small and mid-caps has been on two counts primarily – stabilisation of geopolitical issues including India-Pakistan, Tariffs uncertainty being postponed and earnings growth coming about in small and mid-caps. "Basis Q4 announced till date, large caps have reported about 9 per cent year-on-year (YoY) growth, whereas mid-caps have delivered about 12 per cent growth. Small caps have had a mixed bag. However, that remains always a ground-up investment genre, and if we reflect on our own portfolio companies, we have seen around 18 per cent YoY growth for the quarter. This growth is leading the outperformance," said Bharaddia. Experts point out the valuation and suggest maintaining caution in the mid and small-cap segments. "Investors need to be cautious, valuations are not cheap. Instead of chasing rallies, it's smarter to use corrections to build positions selectively. In this space, patience and quality matter more than timing," said Trivesh. According to Bharaddia, investors should approach small-caps in a stock-specific manner. He believes generalising the segment based on headline valuations or growth often leads to distorted reference points and distracts from growing companies. Another aspect that Bharaddia highlighted is that one should always remember to stagger investments rather than invest the entire funds in one go while investing in small caps. "Inherently, this genre is volatile, and one would be better off to leverage this volatility by staggered investing rather than getting played out by it," said Bharaddia. Bharaddia sees a lot of opportunities across engineering, manufacturing, infrastructure, ancillaries and select consumer plays. "We are largely playing out four multi-year structural themes – increasing export opportunities for Indian manufacturing, import substitution, continuous infra spend and the larger Indian consumption story. We believe these are decadal themes and one needs to just remain invested and allow the power of compounding to play out for wealth creation in these opportunities," said Bharaddia. Read all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
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Business Standard
6 days ago
- Business
- Business Standard
5 stocks to bet on as Nifty Smallcap reaches 200-DMA; check full list here
Technical outlook on smallcap stocks - Anand Rathi, Suven Life Sciences, Pfizer, Clean Science and Jindal Saw seem to be favourably placed, and can potentially gain up to 19% from here on. Rex Cano Mumbai Listen to This Article The NSE Nifty Smallcap 250 index was seen testing resistance around its 200-Day Moving Average (200-DMA) for the second time in as many weeks. The Nifty Smallcap 250 index touched an intra-day high of 16,694 on Monday as against its 200-DMA, placed at 16,720 levels. The index had retraced partly from the day's high, but still held above the 16,600 levels. Technical chart shows the presence of multiple hurdles around the 16,700 - 17,000 range for the Nifty Smallcap index. Breakout and sustained trade above this resistance zone can trigger a potential rally towards 18,200 levels, hint
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Business Standard
13-05-2025
- Business
- Business Standard
Smallcap stock surges 15%, hits record high today; what's behind the rally?
Suven Life Sciences share price today: Shares of Suven Life Sciences (Suven) hit a record high of ₹175, surging 15 per cent on the BSE in Tuesday's intraday trade amid heavy volumes, in an otherwise weak market. The stock price of the smallcap company surpassed its previous high of ₹169, which it touched on September 18, 2024. In past one week, the market price of Suven Life share appreciated 37 per cent after the company announced a fundraising plan by way of issue of equity shares / warrants / any convertible securities / any other securities, through one or more of the permissible modes including but not limited to a qualified institutions placement, preferential allotment etc. At 01:34 PM, Suven share price was quoting 10.5 per cent higher at ₹168.80, as compared to 1.5 per cent decline in the BSE Sensex. Average trading volume on the counter jumped six-fold today with 7.3 million equity shares, cumulatively, changing hands on the NSE and BSE till the time of writing this report. The board of directors of Suven Life Sciences, today, approved fund raising of ₹857.64 crore through fully convertible warrants on preferential basis to continue the funding of R&D, Clinical Development programmes, general corporate purposes, and apex for creating a new R&D facility. The board of directors of Suven Life Sciences, in its meeting on May 13, 2025, approved the issue of 64 million warrants convertible into equity shares of the company on preferential basis to promoter group entity and to certain non-promoter persons/entities at a price of ₹134 per warrant aggregating up to ₹857.64 crore. The board approved allotment of 31.77 million warrants to promoter group entity i.e. Jasti Property and Equity Holdings Private Limited (In its capacity as sole trustee of Jasti Family Trust). The board also approved allotment of warrants to Quant Mutual Fund (4.7 million), Abakkus Diversified Alpha Fund (2.99 million), 3P India Equity Fund 1 (3.36 million), Nilesh Kishor Shah (1.2 million) and Ketan Chhotalal Seth (2 million). Suven Life Q4 results 2025 Suven Life reported a consolidated loss of ₹44.51 crore for the quarter ended March 2025 (Q4FY25), as against a loss of ₹26.74 crore in the year-ago quarter. Revenue for the quarter stood at ₹2.69 crore, as against ₹6.67 crore in Q4FY24. The company said the statement of operations includes financials of Suven Neurosciences, Inc., a Delaware Company, wholly owned subsidiary (WOS) of Suven, involved in clinical development programs of the Company. Suven continues its R&D programs focused on Central Nervous System (CNS) disease disorders and granted 20 patents during the period covering countries Brazil, Eurasia, Europe, Hong Kong, India, Israel, Japan, Macao, Mexico, New Zealand, Sri Lanka, South Africa and USA Clinical development pipeline SUVN-502 (Masupirdine) – Ongoing phase 3 study for Agitation and Aggression in Alzheimer's type dementias in North America and Europe; Enrolling patients in sites in US and Europe. Expected completion by end of FY26. SUVN-G3031 (Samelisant) – Preparing to start Phase 3 clinical study for treatment of EDS in Narcolepsy in Q2FY26. SUVN-911 (Ropanicant) – Phase 2A open label study for Major Depressive Disorder in the USA successfully completed. The initiated Phase 2B clinical study is in Q1FY26. SUVN-D4010 (Usmarapride) – Planning for Phase 2 double blind study for the treatment of Cognition during FY26. SUVN-I6107 – Phase 1 study initiated during FY25 is continuing for establishing safety and pharmacokinetics of the molecule. About Suven Life Sciences Suven, a Biopharmaceutical company, is engaged in Drug Discovery and Development of New Chemical Entities (NCEs) in Central Nervous System (CNS) disorders targeting unmet medical needs, globally. The company has a portfolio of advanced stage clinical candidates and research programs that are designed for CNS disorders such as Alzheimer's disease (AD), sleep disorders, major depressive disorders (MDD), Parkinson's disease (PD), Schizophrenia, Pain disorders, and Gastrointestinal disorders.
