How to Find Micro Cap Stocks With Huge Growth Potential ?

What Are Micro Cap Stocks?

Microcap stocks are companies where the market capitalization is between INR 500 Cr and INR 2,000 Cr. As in Jan 2024, their examples include Phantom (market cap = INR 610 Cr), Salzer Electronics (INR 770 Cr), HPL Electric (INR 1,820 Cr), etc. One of the best ways to discover, follow and track Microcap companies is through Sovrenn, the knowledge authority on smallcap and microcap companies in India. 

Sovrenn covers interesting and promising best high growth micro cap stocks and informs about important updates on these companies in the form of large orders, fundraise, acquisitions, partnerships, capacity expansion, etc.

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Is there a Microcap Index in India?

Yes, we have the NIFTY Microcap 250 Index. This tracks the fundamentally strong micro cap stocks listed on the NSE. The index includes the top 250 companies beyond the Nifty 500 index constituents. A stock’s weight is based on its free-float market capitalization. Sectoral distribution of the Index as of Jan 2024 include Capital Goods at 21.3%, Financial Services at 12.6%, Healthcare at 7.4%,Construction at 7.1%, Chemicals at 6.8%, amongst others.

How to Invest in Nifty Microcap 250 index?

One can invest in the NIFTY Microcap 250 Index through India’s first Microcap Fund -Motilal Oswal Nifty Microcap 250 Index Fund. It is a Passive Fund which replicates the returns of the Microcap Index. As of Dec 2023, its Asset Under Management or AUM stood at INR 620 Cr. It has an expense ratio of 0.35%. This Index is considered suitable for investors who want to have a long- term wealth creation view. 

As of Jan 2024, its top 10 constituents are Ramkrishna Forgings (1.3%), Titagarh Wagons (1.3%), Karnataka Bank (1.3%), Himadri Speciality Chemical (1.3%), Religare Enterprises (1.2%), Jaiprakash Power (1.2%), Reliance Power (1.2%), Ujjivan Financial Services (1.2%), Tamilnad Mercantile (1.0%), South Indian Bank (1.0%).

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Conclusion

Microcap investing, if done after sufficient due diligence, has the potential to generate generational wealth for investors. For those who would like to explore the exciting world of smallcaps and micro cap stocks with huge growth potential, you can learn information driven smallcap/microcap investing at Sovrenn. The learning modules are absolutely FREE. Sovrenn publishes a daily newsletter, that goes by the name Sovrenn Times, where timely and curated updates on interesting developments in the smallcap and microcap space are mentioned. 

The platform also covers thematic buckets like smallcap and microcap companies operating in the Railways, Defence, Capital Goods, 5G, Electrification, etc.