Similar to the Nifty 50 the NSE’s large-cap index, we also have an index dedicated to small-cap stocks called the Nifty Smallcap 50 Index. The small-cap niche is one of the most exciting especially when it comes to making the big bucks. In this article, we cover the top stocks in the nifty smallcap 50 index, its computation and five stocks that are the best investment bets from the nifty smallcap 50 indexes. Keep Reading to find out!
What is the Nifty SmallCap 50 Index and How is it Computed?
The primary objective of the NIFTY Smallcap 50 Index is to capture the movement of the small-cap segment of the market. The Nifty smallcap 50 index represents the top 50 companies. NIFTY SmallCap 50 Index can be used for a variety of purposes such as benchmarking fund portfolios, launching index funds, ETFs, and structured products.
The above table shows the list of the top stocks with the highest weightage in the Nifty small caps 50 indexes. The top 10 stocks have a combined weightage of around 37%.
These stocks included are selected based on average daily turnover from the top 100 companies selected based on full market capitalization in NIFTY Smallcap 250 index. NIFTY Smallcap 50 Index is computed using the free-float market capitalization method. Here the level of the index reflects the total free-float market value of all the stocks in the index relative to a particular base market capitalization value. This index is rebalanced on a semi-annual basis
QUICK READ – List of Nifty 50 Stocks by Weight
Top Stocks in the Nifty SmallCap 50 Index
There are 50 stocks in the Nifty smallcap 50 indexes. We have shortlisted around 5 stocks based on certain filters and parameters, which we think are best suited and top stocks for investment.
We will discuss each of those stocks in detail.
1. Indigo Paints
|Face Value (₹): 10||Market Cap (Cr): ₹ 7,242|
|EPS (₹): 19.4||Promoter’s Holdings (%): 5 4|
|Debt to Equity: 0. 02||Dividend Yield (%): 0. 20|
|ROE (%): 13.9||Stock P/E (TTM): 78.4|
|Current Ratio: 1. 63||Net Profit Margin: 9.28%|
Founded in 2002, Indigo paints is the fourth largest decorative paint company in India. The company has product portfolio includes emulsions, enamels, wood coatings, distemper, primers, putties, and cement paints.
The company has been increasing it consistently increasing its revenues and profits since 2018. The company has given a compounded sales growth of 37% and a profit growth of 62% in the last ten years.
The company has a market capitalization of Rs 7,198 cr. Its PE is on par with the industry PE making it available at a reasonable price.
The company also provides a high return on capital employed and has a very negligible debt making it a very attractive choice of investment.
2. CESC Limited
|Face Value (₹): 1||Market Cap (Cr): ₹ 10,863|
|EPS (₹): 10.4||Promoter’s Holdings (%): 5 2.1|
|Debt to Equity: 1.44||Dividend Yield (%): 5.51|
|ROE (%): 13.4||Stock P/E (TTM): 7.90|
|Current Ratio: 1||Net Profit Margin: 11.2%|
CESC (Calcutta Energy Supply Corporation) Limited is the flagship company of the RP-Sanjiv Goenka Group. It is engaged in electricity distribution with an embedded generation facility and has a distribution network of 23,468 circuit km.
The company also has a power distribution business spread across Noida, Rajasthan & Maharashtra. Additionally, it is also involved in a power-generating business in Kolkata. The company has given sales growth and profit growth of 8% and 19% in CAGR terms over the past 10 years respectively.
A cheap price-to-book ratio of 1.01 times with a dividend payout ratio of 44.1% with consistent earnings(the electricity distribution business of the company being the cash cow) makes it a worthy investment.
A dividend yield of 5.74% with a decent ROE of 12.8% additionally makes the company an attractive investment choice in the power sector in India.
3. CDSL (Central Depository Services Ltd)
|Face Value (₹): 10||Market Cap (Cr): ₹ 12,820|
|EPS (₹): 29.2||Promoter’s Holdings (%): 20|
|Debt to Equity:||Dividend Yield (%): 0.74|
|ROE (%): 31.6||Stock P/E (TTM): 42.1|
|Current Ratio: 5.16||Net Profit Margin: 56.6%|
CDSL is one of the two approved depository institutions in the Indian Capital Market.CDSL operates as a financial securities depository in India. It is responsible for holding securities (such as shares, debentures, and mutual funds) in electronic form and facilitating securities transactions.
CDSL follows an asset-light business model with minimal fixed cost requirements. Due to this, CDSL enjoys a significant level of operating leverage and an excellent operating margin of 62%. Thus, any increase in revenue will directly expand net profit and ROE.
Annual Maintenance charges and transaction charges contribute to around 50% of the revenue of CDSL. IPO & KYC services contribute almost 30% and the rest through remaining sources. The company is debt-free and a monopoly makes it a very good bet in the Fintech space. The company in its recent FY21 September quarterly results has doubled its profits QOQ.
A high-profit growth rate and a healthy dividend payout ratio make this expensively valued stock a strong contender for investment.
4. Welspun India
|Face Value (₹): 1||Market Cap (Cr): ₹ 8,103|
|EPS (₹): 4.04||Promoter’s Holdings (%): 70.4|
|Debt to Equity: 0.83||Dividend Yield (%): 0.19|
|ROE (%): 15.8||Stock P/E (TTM): 18.8|
|Current Ratio: 1 .37||Net Profit Margin: 6.52%|
Welspun India Limited, part of the US$ 2.7 billion Welspun Group, is one of the largest home textile manufacturers in the world. The Company offers a wide spectrum of Home & Technical textile products and Flooring solutions.
It manufactures a wide range of home textile products ranging from towels, and bathrobes to sheets, tops, and basic & fashion bedding.
WIL’s distribution network is spanning in more than 50 countries, making it the largest exporter of home textile products from India. WIL has been a regular supplier to leading retail chains over many years such as Walmart Stores, Costco, Kohls, Bed Bath & Beyond, Ikea, Macy’s, etc, which provides revenue stability to the company.
The company gets 84% revenue from its exports to the US & Europe, and the training from India and the rest of the world. Although the company has shown a low growth in sales in the last 2-3 years the company enjoys a high return on Equity since its inception. The company still trades at a PE of 18.4 and a market cap of 7,912 Crores.
All these factors make the company a good bet in the textile sector.
5. PVR Ltd
|Face Value (₹): 10||Market Cap (Cr): ₹ 11,907|
|EPS (₹): -35.4||Promoter’s Holdings (%): 17|
|Debt to Equity: 3.79||Dividend Yield (%):|
|ROE (%): -31.6||Stock P/E (TTM): –|
|Current Ratio: 0.60||Net Profit Margin: -38.1%|
PVR Limited (PVR) is India’s largest and most premium film exhibition company. It pioneered the multiplex revolution in India by establishing the first multiplex cinema in 1997 in New Delhi and continues to lead the market with a relentless focus on innovation and operational excellence to democratize the big‑screen movie experience.
It currently operates a cinema network of 855 screens with over 1.8 Lakh seats, across 176 properties in 72 cities in India and Sri Lanka, delighting over 10 Crore Indians annually.
The company earns about 52% of its revenues from the sale of movie tickets. It also earns revenues from other activities like the sale of food & beverages contributed 28% to its revenues, followed by advertisement income (11%), Convenience fees (5%) & distribution business (4%).
Although the company was running under losses during the past two years, it has managed to earn profits in the recent quarter of FY22-23.
The company’s ability to raise funds quite successfully during covid and its being the major dominant player & market leader in the movie theatre and multiplex industry in India makes it a strong bet in the entertainment industry in India.
With the opening up of the economy, PVR should perform well in the future with a list of movies lined up for release and audiences waiting to throng back cinema halls.
List of all Companies in Nifty Smallcap 50 Index
|Alok Industries Ltd.||Textiles|
|Amara Raja Batteries Ltd.||Automobile and Auto Components|
|Amber Enterprises India Ltd.||Consumer Durables|
|Angel One Ltd.||Financial Services|
|Anupam Rasayan India Ltd.||Chemicals|
|Bajaj Electricals Ltd||Consumer Durables|
|Balaji Amines Ltd.||Chemicals|
|Bank of Maharashtra||Financial Services|
|Birla Corporation Ltd.||Construction Materials|
|Birlasoft Ltd.||Information Technology|
|Can Fin Homes Ltd.||Financial Services|
|Central Bank of India||Financial Services|
|Central Depository Services (India) Ltd.||Financial Services|
|Chambal Fertilizers & Chemicals Ltd.||Chemicals|
|Chemplast Sanmar Ltd.||Chemicals|
|Computer Age Management Services Ltd.||Financial Services|
|Cyient Ltd.||Information Technology|
|Devyani International Ltd.||Consumer Services|
|Dilip Buildcon Ltd.||Construction|
|Firstsource Solutions Ltd.||Information Technology|
|Granules India Ltd.||Healthcare|
|Graphite India Ltd.||Capital Goods|
|H.E.G. Ltd.||Capital Goods|
|Hindustan Copper Ltd.||Metals & Mining|
|IDFC Ltd.||Financial Services|
|Indiabulls Housing Finance Ltd.||Financial Services|
|Indian Overseas Bank||Financial Services|
|Indigo Paints Ltd.||Consumer Durables|
|Intellect Design Arena Ltd.||Information Technology|
|J.B. Chemicals & Pharmaceuticals Ltd.||Healthcare|
|Jubilant Ingrevia Ltd.||Chemicals|
|KPIT Technologies Ltd.||Information Technology|
|Latent View Analytics Ltd.||Information Technology|
|Laxmi Organic Industries Ltd.||Chemicals|
|Medplus Health Services Ltd.||Consumer Services|
|Metro Brands Ltd.||Consumer Durables|
|Multi Commodity Exchange of India Ltd.||Financial Services|
|NBCC (India) Ltd.||Construction|
|PNB Housing Finance Ltd.||Financial Services|
|PVR Ltd.||Media Entertainment & Publication|
|Poonawalla Fincorp Ltd.||Financial Services|
|RBL Bank Ltd.||Financial Services|
|Radico Khaitan Ltd||Fast Moving Consumer Goods|
|Route Mobile Ltd.||Telecommunication|
|Sterlite Technologies Ltd.||Telecommunication|
|UTI Asset Management Company Ltd.||Financial Services|
|Welspun India Ltd.||Textiles|
|Zensar Technolgies Ltd.||Information Technology|
In India, small-cap stocks have historically outperformed Large-cap stocks in the long run by 10-15% annually. This means if an investment is done right in a small-cap company we should double our money in a span of 2.5- 3 years.
Ideally, we should have at least 10-15% of our funds in good quality small-cap companies, however, we should ensure that we don’t invest more than 5% of our capital in any single small-cap company.
We have seen that small-cap companies like Relaxo and Avanti Feeds can give us 100x returns in the long run. It’s ultimately the small-cap companies that grow up to become large caps and future blue-chip companies .
Identifying them in an earlier stage and investing may be difficult but not impossible. The nifty smallcap 50 Index gives us an opportunity to identify the potential & spot the potential multi-baggers.
We hope you liked the article ” Top Stocks in the Nifty SmallCap 50 Index “. Comment down and let us know if you have invested in any of these companies. Happy Investing
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I have CDSL in my list and adding more shares to the list is like its getting into the triple figure now. Already have 90 in my list. Thanks!