Best Small Cap Stocks You Can Invest in 2023

Small-cap stocks are a subset of the equity market that have lower capitalization, in comparison with large-cap stocks. They are typically defined by their market capitalization: the value of outstanding shares multiplied by the number of outstanding shares.

They generally have a market capitalization below Rs.5,000 crores, but may be more in some cases.

The purpose of small-cap stocks is to provide investors with an opportunity to gain exposure to companies that may not be included in large-cap indices. Small-cap companies tend to be more volatile than larger companies, but they also tend to offer higher growth potential.

They are mostly traded on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Best Small Cap Stocks For Long Term India 2023

Factors To Consider Before Investing In Small-Cap Stocks

When you're thinking about investing in small-cap stocks, it's important to consider the risks associated with the asset class. In the case of small caps, its as follows:

• Volatility

The volatility of stock refers to its tendency to change price over time. Small-cap stocks are often more volatile than large caps because they tend to be less established and have less cash flow.

This means that they can experience rapid increases or decreases in price, which can make them difficult for investors who are looking for steady income streams from their investments.

• Investment Horizon

As long as you've got time on your side, you'll generally be able to make money off of small-cap stocks—but only if you're willing to wait for long periods between purchases and selloffs.

If you need cash quickly, this isn't going to work out well for you—but it could be great if you know that there's going to be some kind of event on the horizon (like an IPO) that will cause prices to rise dramatically (and give you a chance at making big profits).

• Risk Factor

Investors should always be aware of the risks associated with investing in small-cap stocks. Small-cap stocks are considered high-risk investments because they are often less well-known than larger companies and because their share prices can change dramatically over short periods of time.

• Returns

Small-cap stocks can give you higher returns than large-cap stocks. However, it is important to note that the returns given by these stocks are not consistent. While some years they may give you high returns, others they may not do so.

• Cost of Investment

The cost of investing in small-cap stocks is lower as compared to investing in large-cap stocks. However, there are other expenses associated with investing in small-cap stocks like brokerage fees and transaction costs that need to be considered before making an investment decision.

• Taxation

If you are not a resident Indian and buy small-cap shares through an Indian broker, then capital gains on such investments will be taxed as per Indian laws. You need to consider whether taxes will be levied on your profits or losses from small-cap stocks when deciding upon whether or not to invest in them. 

• Company Growth

Another way to assess whether or not a company is financially sound is by looking at how much it earns each year and how much money it has on hand. If they don't have enough cash on hand, there's a chance they won't be able to pay their employees or other bills as needed.

You should also know that companies usually operate at a loss when they first start out because they need time to get established and build their client base before turning profitable (or even breaking even). You should only invest in companies with long-term growth potential if you want them to succeed over time.

Best Small-Cap Stocks For 2023 India: Top Stocks Overview

Here is the overview of the top small cap company stocks that have performed well-

1) NESCO Ltd.

Nesco Limited is engaged in licensing premises in information technology (IT) park buildings and providing related services; licensing premises for exhibitions and providing services to the organizers; manufacturing of machines and capital equipment and hospitality and catering services. 

Its business segments include Nesco IT Park, which provides office space on lease to companies; Bombay Exhibition Centre, which provides infrastructure to Indian and foreign organizers for guest exhibitions and event; Nesco Foods, which caters to banquets, exhibitions, food and beverage (F&Bs) and offices situated in the Nesco Premises and Indabrator, which is a manufacturer of surface preparation equipment with integrated manufacturing facilities for equipment, spares and abrasives in Gujarat. 

2) Thyrocare Technologies Ltd

Thyrocare Technologies Limited is an India-based healthcare service provider, often deemed one of the top small cap stocks company to go for. The Company operates with a centralized processing laboratory (CPL) in Mumbai, India for esoteric tests, and a regional processing laboratory in metro cities of India and other parts of Asia. Thyrocare Technologies Ltd is one of the most active small cap stocks in India.

Thyrocare Technologies Ltd is a leading provider of diagnostic and imaging services in India with a market capitalization of 3,553 CR.

3) Delta Corp Ltd

Delta Corp Limited is an India-based holding company that is engaged in the casino (live, electronic and online) gaming industry in India. The Company's segments include Casino Gaming Division, Online Skill Gaming Division and Hospitality Division. It operates in Goa, Daman, Gurgaon, Sikkim and Nepal in the Casino Gaming, Hospitality and Online Skill Gaming segment through its subsidiaries. 

4) VST Industries

VST Industries Ltd. is a public conglomerate company. It is headquartered in Hyderabad. The company is known to manufacture and distribute cigarettes. Found in 1930, its current share price is Rs. 3195.80. Additionally, the company’s current market capitalization is 4,934 CR.

5) Bajaj Consumer Care

Bajaj Consumer Care Limited is a fast-moving consumer goods (FMCG) company. The Company is engaged in manufacturing of hair oils and personal care products. The Company operates through the Cosmetics, Toiletries and Other Personal Care products segment. It also owns the Nomarks brand in India. 

Conclusion

Small-Cap stocks are typically the stocks that have not yet made it to the list of popular large-cap or blue-chip stocks. Small Caps are generally unproven companies, but with immense growth opportunities for the future. Each small cap best stocks mentioned in this article carries huge growth potential, and each will be an excellent investment opportunity for anyone looking to invest in the Indian stock market.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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Research Analyst - Bavadharini KS