Small-cap stocks are in buzz nowadays because of the outsized returns they have generated for investors compared to large and mid-cap stocks. In the last year, the Nifty SmallCap 50 Index has increased by 67%, compared to 21.56% by Nifty 50 as of 31 May 2024.
However, investing in small cap stocks is a different ball game. Most companies have untested business models for scaling further, lacking the right talent pool to take the company forward and the financial resources to compete with the big players in the market. Therefore, you must choose the right small-cap stock with growth potential and consistently grown earnings.
This article will discuss the top 10 small cap stocks in India for 2024. Let’s start.
What are Small Cap Stocks?
Small cap stocks are shares of companies with a market capitalization in the range of ₹500 to ₹5,000 crores. Unlike midcap stocks, which are in the growth phase of the business cycle after establishing a niche in the market, small cap stocks are at the beginning of the business cycle and have yet to enter the growth phase. It can result in tremendous growth potential, making stocks of such companies highly volatile.
Let’s now look at the top 10 small cap stocks in India for 2024. The stocks selected have a market capitalization in the range of ₹500 to ₹5,000 crores, Return of Equity of more than 15%, and have recorded compounded revenue and sales growth of more than 15% in the last three years.
Top Small Cap Stocks in India for 2024
- Jamna Auto
- Gulf Oil India
- Banco Products
- Muthoot Microfin
- Cigniti Technologies
- The Anup Engineering Ltd
- Thangamayil Jewellery
- Lumax Ind
- Siyaram Silk
- India Glycols
Jamna Auto
Jamna Auto is a leading auto-ancillary company based in Delhi that specializes in automotive suspension manufacturing. It is India’s largest and the world’s second-largest manufacturer of tapered leaf springs and parabolic leaf springs for automobiles. The company caters to all industry segments, including OEMs, replacement, and export markets.
| 3-year Stock Price CAGR | ₹4,707 |
| 3 year Stock Price CAGR | 14% |
| 3 year Compounded Sales Growth | 31% |
| Return on Equity | 24.4% |
Gulf Oil Lubricants India Limited
Gulf Oil is a part of Hinduja Group, a renowned name in the lubricant and motor fuel industry. It offers various products, including motor fuels and lubricants for vehicles and non-automotive machines. The company’s earnings per share have been gradually rising in the last five years, rising from ₹35.70 in 2019 to ₹62.66 in 2024. It maintains a healthy dividend payout ratio.
| Market Capitalisation (in cr) | ₹4,298 |
| 3-year Compounded Sales Growth | 8% |
| 3 year Compounded Sales Growth | 26% |
| Return on Equity | 24.9% |
Banco Products
Banco Products is a leading auto ancillary company that has carved a niche as a leader in engine cooling and sealing systems. Its product offerings include radiators, intercoolers, oil coolers, and engine gaskets for automotive and industrial applications.
The company’s earnings per share has consistently risen for many years, reflected in its price. In the last 10 years, the share price has registered a compounded growth of 19%.
| 3-year Stock Price CAGR | ₹4,207 |
| 3 year Stock Price CAGR | 53% |
| 3 year Compounded Sales Growth | 22% |
| Return on Equity | 26.4% |
Muthoot Microfin Limited
Muthoot Microfin is a leading microfinance arm of Muthoot Pappachan Group based in Kochi. The company is focused on providing micro-loans to women entrepreneurs in rural regions of India.
To date, the company has disbursed ₹40,525 crores in loans to over 33 lakh customers. It operates through 1508 branches in 19 states and union territories.
| 3-year Stock Price CAGR | ₹3,639 |
| 3-year Compounded Income Growth | – |
| 3 year Compounded Income Growth | 49% |
| Return on Equity | 20.4% |
Cigniti Technologies
Cigniti Technologies is a world leader in AI & IP-led Digital Assurance and Engineering services. It helps global companies across industries continuously accelerate their digital transformation and become digital-first.
Its client base includes over 60 Fortune 500 companies, and its satisfaction rate is 92%. The company has been in business for over 10 years and has recorded a compounded sales growth of 21% in the last 10 years.
| Market Capitalisation (in cr) | ₹3,614 |
| 3-year Compounded Sales Growth | 42% |
| 3 year Compounded Sales Growth | 27% |
| Return on Equity | 25% |
Anup Engineering Limited
Anup Engineering Limited was demerged from its holding company, Arvind Limited, in 2018. It is a significant player in the heavy fabrication industry, supplying equipment to nearly all major projects in Oil & Gas, petrochemicals, chemicals, fertilizers, power, aerospace, and other process industries in India.
Since its demerger, the company has maintained a solid financial profile, more than doubling its revenue and, therefore, its net profits in the last five years.
| 3-year Stock Price CAGR | ₹3,480 |
| 3-year Compounded Sales Growth | 58% |
| 3 year Compounded Sales Growth | 25% |
| Return on Equity | 21.3% |
Thangamayil Jewellery
Thangamayil Jewellery is one of the fastest-growing retail jewelry chains in South India and is present in several districts in Tamil Nadu. It primarily deals with four products: Diamonds, Gold, Silver, and Platinum, with the sale of gold being the predominant source of income.
The company’s sales have increased well in the last five years, growing at a compounded rate of 22%. It has also recorded strong earnings per share growth in the last three years, from ₹14.07 in FY22 to ₹44.91 in FY24.
| 3-year Stock Price CAGR | ₹3,490 |
| 3-year Compounded Sales Growth | 43% |
| 3 year Compounded Sales Growth | 28% |
| Return on Equity | 28% |
Lumax Industries Limited
Lumax is a leading player in the automotive lighting business for all types of passenger and commercial vehicles, including two-wheelers. The company was founded in 1945 as a trading company and later pivoted to the automotive lighting business. It collaborates with Stanley, Japan, a world leader in vehicle lighting and automobile illumination products.
Lumax provides lighting solutions to leading Indian and global automobile manufacturers, including John Deere, Land Rover, Jaguar, Audi, Nissan, Hero, Honda, Tata Motors, and Mahindra.
| 3-year Stock Price CAGR | ₹2,421 |
| 3-year Compounded Sales Growth | 16% |
| 3 year Compounded Sales Growth | 23% |
| Return on Equity | 17.7% |
Siyaram Silk Mills Limited
Siyaram Silk Mills is India’s foremost men’s textile and fashion conglomerate. Established in 1978, Siyaram is a trusted brand offering high-quality fabrics and ready-made garments. It has an annual production capacity of 100 million meters of fabric and 5 million garments.
| 3-year Stock Price CAGR | ₹1987 |
| 3 year Stock Price CAGR | 12.53% |
| 3-year Compounded Sales Growth | 24% |
| Return on Equity | 16.2% |
India Glycols
India Glycols is a leading manufacturer of industrial and specialty chemicals. Its businesses include bio-based specialties, performance chemicals, Ennature Biopharma, and Potable Spirits. With an impressive product portfolio in pharmaceuticals, food and beverages, personal care, and industrial sector products, it exports to more than 40 countries, including India.
| 3-year Stock Price CAGR | ₹2,364 |
| 3-year Compounded Sales Growth | 10.51% |
| 3 year Compounded Sales Growth | 12% |
| Return on Equity | 8.75% |
Why Invest in Small Cap Stocks?
Investing in small cap stocks offers several advantages despite the risks involved, such as:
- High Growth Potential: Small-cap stocks provide unmatched upside growth potential. It should be noted that all large-cap stocks began as small-cap companies. Investing early in small caps allows you to benefit from their growth trajectory.\
- Higher Returns: Despite the higher risk of losses from investment, small-cap stocks tend to outperform large-cap stocks. Including small-cap stocks in your portfolio can boost your returns.
- Market Niche: Most small-cap stocks that have shown steady performance operate in niche markets or offer innovative products and services that are difficult to match by competitors. This offers a unique investment opportunity to benefit from their growth trajectory.
- Merger and Acquisition Potential: Larger companies often acquire successful small caps at higher valuations, and investors benefit from the premium paid for their shares.
Conclusion
Investing small cap stocks is rewarding, but you must consider several factors. For instance, the companies have displayed consistent revenue growth and can sustain that growth. It should not be short-lived. Besides revenue growth, consider the Total Addressable Market for the opportunity the company is pursuing.
Small-cap companies with significant growth potential often target large markets that allow them room for expansion. Before investing, check out the company’s leadership or management team and their achievements.
*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
FAQs
What are the best small cap stocks in India?
You can filter out the best small cap stocks based on their past financial performance and management efficiency. However, you can also look at stocks that are part of the Nifty Smallcap 250, Nifty Smallcap 50, and BSE Smallcap Indexes.
Are stocks below ₹10 small cap stocks?
Stocks with market capitalization ranging between ₹500 to ₹5000 crores are considered small-cap stocks. Share price doesn’t indicate the market capitalization of the stock.
Is investing in small cap stocks safe?
Small-cap stocks are often associated with higher volatility, but companies with strong financials are relatively safer and have higher growth potential.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.