Small Cap Investments: Study amid Tariff-season
Small-cap shares are coming back with a bounce back in 2025, driven by the Nifty Small Cap 100 index which has jumped around 1% recently, ahead of broader indices. This upturn is backed by India’s strong GDP growth estimate at 7% and favourable valuations in the small-cap space holding promise for high-risk, high-reward potential. Experts predict returns of 15-20% over the next couple of years for diligently researched smallcap shares to make 2025 a value year for these gems-in-waiting.
Why Smallcaps Shine in 2025
Smallcaps live on India's growing economy, particularly in the crucial sectors of renewable energy, specialty chemicals, infrastructure, and technology. Fundamentally sound companies like Premier Energies are gaining investor attention because of low leverage and high growth prospects. Broking houses stress investing in these sectors to ride India's growth cycle.
Best Brokerage Small-cap Stock Recommendations
Brokerages suggest diversified stock recommendations such as:
- Oswal Pumps: P/E ~33, healthy quarterly profit and sales growth, ROCE 77.89%
- Swaraj Engines: P/E ~28, consistent sales growth, ROCE 56.21%
- Shakti Pumps, Crizac, Unifinz Capital, Hawkins Cookers, Ashoka Buildcon, Sharda Motor, and Cigniti Technologies
These stocks exhibit strong fundamentals, high returns on capital employed, and good profit growth, and thus form core investments for small-cap investors.
Market Sentiment & Smallcap Performance
The smallcap space is positive with the Nifty SmallCap 100 index gaining 1.37% till September 1, 2025. Encouraging manufacturing numbers, robust quarterly results, and better economic numbers are supporting confidence of investors. Auto, consumer durables, and IT sectors are imparting a positive environment to smallcaps and sustaining gains.
Risks and Investment Horizon
Smallcaps experience greater volatility and take steeper corrections in times of a bear market. A suggested investment horizon of 4-5 years will stand the test of near-term volatility. Diversification (10-15 stocks) and periodic checks of earnings and management quality are key techniques promoted by brokerages for reducing risk without sacrificing growth potential.
Recent Performance and Earnings Trends
In June 2025, the Nifty SmallCap 100 index saw a 6.66% monthly gain, while there were some net profit contractions witnessed, indicating selective stock picking. This reflects the value of attention to fundamentally sound companies that can withstand the headwinds in sectors.
Disclaimer:
The information provided in this article is for informational and educational purposes only. It is based on publicly available shareholding data and does not constitute investment advice or a recommendation to buy, sell, or hold any security. Stock market investments involve risks, including the risk of loss of capital. The Daily Guardian does not reflect the recommendations given by several brokerage houses. Readers are advised to conduct their own research and consult with a qualified financial advisor before making any investment decisions.
