Small-Cap Stories

Small-cap stocks have a sex appeal to them. Their charm is in doubling your money in a year, or getting a 100-bagger in a few years, when the small-cap becomes a large-cap. It is a thrill to buy Zee Telefilms at Rs 100 and see it go to Rs 10,000. Add the glamour of talking about it at cocktail parties, and small-caps become irresistible. This is not true for retail investors alone. Professional investors can bring a few extra percentage points to their returns if a small-cap stock clicks. Bull markets are times when the interest in small-caps goes up phenomenally. And, in the bull market of the past three years, we have seen mid-caps and small-caps outperforming large-caps by a huge margin. The definition of a small-cap stock is not objective, and you will rarely find two organisations agreeing on what makes a small-cap company. At Value Research, we divide companies into four categories based on their market capitalisation (which is the product of the stock price and outstanding shares): giant-caps, large-caps, mid-caps and small-caps. Stocks that make up the top 50 per cent of the market capitalisation on BSE are classified as giant-caps. Stocks that fall in the capitalisat

This article was originally published on October 11, 2005.