A massive boom in Indian smallcaps is helping Main Street’s small retail investors beat the large institutional players that dominate Dalal Street. Smallcaps owned by some of the top czars have given impressive returns going up to 57% in the first 6 weeks of 2024.

We scanned the portfolios of top 5 smallcap HNI investors – Mukul Agrawal, Ashish Kacholia, Vijay Kedia, Dolly Khanna and Anil Kumar Goel – and found that at least 14 of their stock picks have given over 20% return so far in the calendar year.

Mukul Agrawal Portfolio

The ace investor owns more than 50 stocks, the value of which is estimated to be around Rs 5,000 crore. While multibagger BSE is his largest bet where he held around 1.5% stake at the end of the December quarter, 11 of his bets have given double-digit returns in 2024 so far.

Mitcon Consultancy & Engineering Services, in which Agrawal owns 2.88% stake, is the top performer with a year-to-date return of 57%. Other top gainers include Gensol Engineering, Neuland Laboratories, Indian Metals & Ferro Alloys, Sula Vineyards and Ethos.

Ashish Kacholia Portfolio

The smallcap czar holds 49 stocks, the value of which is around Rs 3,000 crore. Three of his holdings – Garware Hi-Tech Films (31%), Basilic Fly Studio (30%) and Carysil (26%) – have rallied at least 20% so far in the year.

Vijay Kedia Portfolio

The top performer in Vijay Kedia’s kitty is Neuland Lab, which is also owned by Mukul Agrawal. The smallcap pharma stock, in which Kedia owns 1.25% stake, is up 22% YTD.

Dolly Khanna Portfolio

Chennai-based Dolly Khanna, whose portfolio is managed by husband Rajiv Khanna, has seen at least 6 stocks in her purse rally at least 20% YTD. Pondy Oxides & Chemicals is the top gainer in the pack with a 42% rally, followed by KCP’s 40% and Rajshree Sugars & Chemicals’s 38%.

Other top gainers in her portfolio are Zuari Industries, Salzer Electronics and Savera Industries.

Anil Kumar Goel Portfolio

Anil Kumar Goel is best known for investments in commodity sectors like sugar, textiles, steel, etc. Two of his top performers in 2024 are Precot (21%) and Samtex Fashions (21%).

What should investors do?

The Indian market is now in a phase where Nifty valuation is cheaper than the long-term averages while smallcaps are becoming expensive with every passing quarter.

Prabhudas Lilladher’s quantitative indicators show that more than 70% of all stocks in the mid and smallcap segment are trading at least one standard deviation above their historical multiples.

“That is a cause of concern, coupled with all the euphoria that we have seen in the rally that has built up so far. Some correction and much higher volatility can be expected in the mid and smallcap space. But I still maintain a very-very positive bias towards equities globally and in India as well,” said Siddhart Vora of Prabhudas.

Barring some unexpected and sharp downturn in the global economy, experts say largecaps have scope for upside in the next few quarters as their valuations are still not in the overvalued or bubble zone, especially considering the growth in earnings expected for the next couple of years.

“Valuations for mid-caps and small-caps are at highs and the margin of safety has reduced. So, we need to be more selective in picking stocks. I would recommend limiting exposure to thematic or sectoral funds when markets are trading at the higher range of valuation bands,” said Mihir Vora, CIO, TRUST Mutual Fund.

Experts suggest picking domestic stocks in consumption, manufacturing, infrastructure, real estate, defence, railways, construction, etc.

(Data: Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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