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Investing in micro-cap stocks can offer potential rewards, but it also comes with several risks that investors should be aware of. Nirav Karkera, Head of Research at Fisdom, tells us about what the micro-cap valuations are hinting at and how funds can manage the risks in micro-cap funds. Listen in
“Unlike the large and midcaps, a particular sector growth is not going to drive a large number of microcaps because a lot of them are completely different from each other. The second thing is the liquidity issue. Even when you are including companies, they will have to take a very small exposure, which by its very nature, automatically raises the number of holdings in the portfolio.”
On a year-to-date (YTD) basis, the stock of this micro-cap company surged 5 percent versus a 10 percent rise in the benchmark Sensex. The market capitalisation of the company stood at Rs 454 crore
The fund is neither a return-maximisation proposition nor a risk-optimisation proposition as it is very thinly spread among 750 stocks.
Analysts attribute this strong divergence of performance between two pockets of the market to a combination of solid corporate earnings and active participation of both local and institutional investors in the India growth story which goes well beyond bluechips.