BSE mid cap index tumbled by more than 25 percent from Jan 2018 highs and there is slide of more than 35 percent in BSE small cap index where as Sensex & Nifty climbed by nearly 8 percent during the same period. The divergence between Sensex / Nifty and Small & Mid Cap Index will not last for long going forward considering valuations gap emerging between large caps in comparison to mid & small cap stocks. In terms of valuations, lot of froth has gone away in small caps compared to large caps. While everything in broader market is not cheap, many selective small and mid caps are now available at decade low valuations and look very attractive investment opportunities.
The greed to get multibagger returns by investing in small and mid caps in year like 2016 & 2017 turned out to fear these days. Inspite of attractive valuations of many small and mid size companies backed by sound business fundamentals, no body wish to look at this space now. Investors who were willing to pay much higher price for small and mid cap stocks in 2017 are shying away to invest in these stocks which are now available at lower than halve the prices of 2017.
The reason is the carnage in stock prices of many well-known small and mid cap companies. Individual small and mid cap stocks are touching 52-week lows every other day and individual damage to most of the stocks in this category is to the tune of 50-60%, some even more than that. Such severe and fast erosion of capital in small and mid caps have butchered investors conviction towards this category. Retail investors have taken the back foot and lost their faith and conviction towards investing in small and mid caps due to existing pain in their portfolios.
We have been saying this time and again - don’t try to time the market. We firmly believe that to get the best returns in the long term, investors should invest in a staggered and disciplined manner irrespective of market conditions. Investing through ups and downs of the market lets your investment grow and averages the purchasing cost. Equity investment is a serious business meant for long term investors. Trying to get in when the market goes up and getting out when there is a correction does not help you to create wealth.
Have you also stopped investing in small & mid caps and made up your mind to sell your stocks holdings once the prices recover in future? If your answer is yes, you are committing a bigger mistake now. Do not allow your emotions to take control of your equity investment decisions, instead inculcate habit of investing in discipline manner.
Let us share some valuable insights to make you understand why we believe buying the right set of small and mid caps now can be a massive wealth creating opportunity in the long run. To make our readers understand bull as well as bear phase of markets, we have covered long term monthly charts of some of our own small and mid cap stocks recommendations (released under Hidden Gems and Value Picks) over last 9 years which at one point of time were down by 50% to 70% from their peak but turned out to be mega multibagger stocks in longer run delivering upto 64X returns.
Below are the Monthly Chart (since Jan'10) of 8 Multibagger Small Cap Stocks released under Hidden Gems service.
3. Roto Pumps (Hidden Gem released on 05th Aug'12) - Read Old Report
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