Majority of Smallcap Stocks have multiplied in value since Covid’s low point

New Delhi, March 5 : More than two-third of all smallcap stocks have become multibaggers since the stock market bottom of Covid-19, as per an analysis by DSP Mutual Fund.

One-third of the companies have outperformed the Nifty Index, while only 10 per cent firms gave negative returns or lost money since the Covid bottom.

The top 20 performers ran at a CAGR of 76 per cent, on average, which means tripling every other year.

In comparison, in the bull run of 2003-07, more than three-fourth of all stocks had become multibaggers. Only six stocks had given negative returns and the top 20 performers ran at a CAGR of 160 per cent, on average.

The report notes that the overall wage bill growth for BSE500 has decelerated to 11 per centa notable decline from the 20 per cent observed a couple of quarters ago. Of concern is the more pronounced moderation in the growth of the private sector wage bill, which has slowed to 9 per cent YoY — a 10-year low excluding the impact of Covid-19.

If this sharp slowdown continues, it has the potential to impact consumption, especially in the premium segment, the report said.

“This can also have implications for the small and midcap stocks, which have shown exceptionally strong profit growth led by significantly higher margins.

Slowing wages growth, subdued core inflation and expectations of low growth in nominal GDP create questions about the sustainability of SMID earnings momentum and valuations, the report said.