Around two-third of small-caps have become multi-baggers in last 4 years: DSP Report

One-third of the companies have surpassed the Nifty Index, with only 10 percent of firms yielding negative returns, says Netra report by DSP Mutual Fund.

Vaamanaa Sethi
First Published6 Mar 2024, 06:27 PM IST
 Like auto and auto ancillary stocks, the performance of railway and railway ancillary stocks goes hand in hand. (Image: Pixabay)
Like auto and auto ancillary stocks, the performance of railway and railway ancillary stocks goes hand in hand. (Image: Pixabay)

Since the COVID-induced stock market bottom, over two-thirds of small-cap stocks have experienced significant increases in value, making them multibaggers, according to Netra report by DSP Mutual Fund.

A multibagger stock is an equity stock which gives a return of more than 100%.

As per the report, there were around 293 multibagger stocks between March 2020 and February 26, 2024, which included 52 large cap, 77 mid cap and 164 small cap stocks.

One-third of the companies have surpassed the Nifty Index, with only 10 percent of firms yielding negative returns. Among the top 20 performers, the average compounded annual growth rate (CAGR) stood impressively at 76 percent, indicating a remarkable trend of tripling in value every other year.

Sneak-peak at history (2003-2007)

The market witnessed an extraordinary surge as over three-fourths of all stocks emerged as multibaggers, signifying a substantial increase in their value. This widespread growth indicates a buoyant and optimistic sentiment among investors, with many companies experiencing significant gains in their market valuation, as per the DSP report.

In contrast to the overwhelming success seen across the market, only a mere six stocks recorded negative returns. This indicates a relatively small proportion of underperforming stocks amidst the overall positive trajectory of the market. Despite this, the majority of stocks displayed resilience and strength, contributing to the overall bullish trend.

Among the top performers, the cream of the crop showcased exceptional growth, with the top 20 performers boasting an impressive compounded annual growth rate (CAGR) of 160%. This stellar performance underscores the presence of standout companies that have not only weathered market challenges but have thrived, delivering remarkable returns to investors. Such robust growth rates indicate a combination of strong fundamentals, effective management, and market demand driving these companies' success.

"The last time equity risk premium (difference in earnings yield of stocks versus bonds) was so low was at the peak of the market before the global financial crisis of 2008. This doesn’t have the ability to signal any upcoming crisis but indicates a similar disregard for risk," said Sahil Kapoor, Head of Products & Market Strategist, DSP Mutual Fund.

Tech sector holds lion share in world market cap

The report further revealed that the technology’s share in world market cap is nearing 40 percent, if we add tech companies from China, India, EU & ROW.

“No sector has reached this level of concentration before. The last record (a derived approximation form past data) suggests that Oil & Gas (the broad energy sector at the time) accounted for nearly a third of world equity market capitalization in 1980s,” it stated.

Moreover, recently, the technology space has heated up like never before scaling summits not seen earlier. The Nasdaq composite has gained 8% in share of global market cap since the COVID bottom. Over the last year and a half, the IT sector indices have rallied while performance of most other sectors have been subpar. This makes this rally high concentrated.

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First Published:6 Mar 2024, 06:27 PM IST
HomeMarketsStock MarketsAround two-third of small-caps have become multi-baggers in last 4 years: DSP Report

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