Key takeaways from @unifi2maran webinar from @kotaksecurities :
Classification of mcap :
Large cap --> Top 1-100 companies hv Mcap 11L to 27k cr
Midcap -->101-250 companies hv Mcap 27k to 7k cr
Small cap --> 251-500 companies hv Mcap 7k to 2k cr
Classification of mcap :
Large cap --> Top 1-100 companies hv Mcap 11L to 27k cr
Midcap -->101-250 companies hv Mcap 27k to 7k cr
Small cap --> 251-500 companies hv Mcap 7k to 2k cr
As of today , following
-76% comp are large cap – top 100 companies make up 3/4th of the mcap. Reason for FIIs & significant institutional research
-15% midcap – approx 150 companies . Some researched by institutions.
-9% small cap – Less researched by institutions.
-76% comp are large cap – top 100 companies make up 3/4th of the mcap. Reason for FIIs & significant institutional research
-15% midcap – approx 150 companies . Some researched by institutions.
-9% small cap – Less researched by institutions.
Small caps trade cheap in bear market and can be extremely high valued in bull market. The divergence is huge.
80% FII holdings in nifty companies . FII trade directly impacts NIFTY. Their impact on non-NIFTY stocks is not dominant.
FIIs are of different categories. -->
Long term – PE,Sovereign/Pension Fund
Short term – Global Mutual funds / Passive funds , Hedge funds
FIIs are of different categories. -->
Long term – PE,Sovereign/Pension Fund
Short term – Global Mutual funds / Passive funds , Hedge funds
In rising markets , small cap performs better than midcap which performs better than large cap
Similarly in bear markets , large cap falls lesser than midcap which falls lesser than smallcap.
Similarly in bear markets , large cap falls lesser than midcap which falls lesser than smallcap.
2 observations :
- 2003- 2007 , Sensex went up 7x , midcap 11x , small-cap 15x . All gains lost in 2008. Extreme volatility. Worst investors are the people who start investing in small caps closer to the peaks.
- All these lines converge in panics.
- 2003- 2007 , Sensex went up 7x , midcap 11x , small-cap 15x . All gains lost in 2008. Extreme volatility. Worst investors are the people who start investing in small caps closer to the peaks.
- All these lines converge in panics.
- 2001 . 1 –1.5 year to bounce back.
- ~ Jun 2008. 8-9 months
- Sep 2013 – India specific reasons. 6-7 months for bounce back.
- 23rd march 2020 – all lines converged again.
Each time there was a convergence, bounce back was better by small caps and midcaps than large caps
- ~ Jun 2008. 8-9 months
- Sep 2013 – India specific reasons. 6-7 months for bounce back.
- 23rd march 2020 – all lines converged again.
Each time there was a convergence, bounce back was better by small caps and midcaps than large caps
Not sure , how long it will take for the bounce back but one thing is sure bounce back will be higher for small cap.
Currently , ~150 companies are at 52wk high. Most of them are small caps/ mid caps.
Currently , ~150 companies are at 52wk high. Most of them are small caps/ mid caps.
Default chances of going wrong in small cap and midcap are much higher because the research reports are lesser and business needs to be understood well.
Price = Earnings *(P/E)
It has 2 components :
- Earnings move with the business cycle. They don't change every quarter. Understanding of the company is required.
- P/E expansion - Understanding PE requires more understanding of FII, market sentiment, etc..
Chase Earnings.
It has 2 components :
- Earnings move with the business cycle. They don't change every quarter. Understanding of the company is required.
- P/E expansion - Understanding PE requires more understanding of FII, market sentiment, etc..
Chase Earnings.
Smallcaps are not equal to small companies. Largecaps are not leaders.
They might be large players but the business market might not be huge or the business may be too fragmented.
They might be large players but the business market might not be huge or the business may be too fragmented.
Oil & Gas, telecom only have large caps
Spec Chem business is ~2 lakh cr
Largest spec chem player is not a large cap.
Largest Diagnostics itself is not a large cap but that doesn't make it a small company
Spec Chem business is ~2 lakh cr
Largest spec chem player is not a large cap.
Largest Diagnostics itself is not a large cap but that doesn't make it a small company
In case of small cap investing, promoter holding is important :
Top 100 companies – 53%
Next 150 companies – 59%
Next 250 companies – 56%
Promoters know the business better. In case of small cap investing, important to track it in absence of much data.
Top 100 companies – 53%
Next 150 companies – 59%
Next 250 companies – 56%
Promoters know the business better. In case of small cap investing, important to track it in absence of much data.
Check when do they dilute and when do they buy ?
When do you list ? When the sector is doing well ?
Do you do the dilution at highest price ? Bringing IPOs at the peak ?
How many promoters keep increasing the stake during bull phase ?
Promoters buy with long term outlook
When do you list ? When the sector is doing well ?
Do you do the dilution at highest price ? Bringing IPOs at the peak ?
How many promoters keep increasing the stake during bull phase ?
Promoters buy with long term outlook
Thanks to @kotaksecurities & @unifi2maran
for their insights on small cap investing in the times of crisis.
@varinder_bansal @AnyBodyCanFly @vivbajaj @darshanvmehta1 @AnilSinghvi_
#Learningtogether #smallcapinvesting
for their insights on small cap investing in the times of crisis.
@varinder_bansal @AnyBodyCanFly @vivbajaj @darshanvmehta1 @AnilSinghvi_
#Learningtogether #smallcapinvesting
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