India’s stock market is very large where more than 5,000 companies are listed. And everyone wants his money to be in the right place. But the question is where to invest and where to escape? If you are also in this dilemma, then a new study by Omnisins Capital “Omni Four Folios: Study on Indian Equity Markets” can prove beneficial for you.
Will it be right to invest in midcap and smallcap stocks or not?
Study states that at present, the prices of midcap and smallcap stocks have increased considerably, that is, they are overwell. However, their growth potential is good. On the other hand, largecap stocks are getting at a higher price, that is, if you are investing for a long period, then you can get better opportunities here.
If we talk about the numbers, then the PE ratio of the major index is as follows by 25 December 2024:
Nifty 50 – 23.3
BSE Midcap – 29.9
BSE Smallcap – 32.6
Nifty 500 – 26.7
It is clear from these figures that the price of big stocks is going on average on average, but small stocks have become expensive. Nevertheless, some smallcap companies can give excellent returns, it is necessary to make the right choice.
Four types of companies – where to invest money and where not at all?
Omnisins Capital has divided the Indian market into four categories, so that investors can understand where to invest money will be beneficial and where harm can be done.
Capital Destroyers – Most Dangerous Companies
Putting money in these companies means drowning money. Most smallcap companies fall in this category. It has 341 Smallcap out of 374 companies. Sectors such as chemicals, real estate, textile, telecom, metals and constructions include the most.
Capital Eroders-Gradually deficit companies
Companies of this category gradually reduce investors’ money. Many companies from automobiles, chemicals, oil & gas and machinery sector are included.
Capital Imploders – Good companies, but very expensive
The growth of these companies is good, but their price is so high that putting money here can harm. Pharma, textile, IT, food and personal care companies come in this category.
Capital Multipliers – Real Diamonds
These are the companies where the possibility of getting strong returns by investing money is the highest. Many strong companies in sector like banking, construction, automobiles, metals and NBFCs fall into this category.
Super Folio – Which are the most strong returns companies?
The best companies are also placed in a separate category named Super Folio in Capital Multipliers. These are companies that are found at strong balance sheet, great growth and right price. More than 50% of this folio is of banking services and 80% of companies fall in the LarGECAP category. Meaning, if we look at big banks, then they can get good investment opportunities. In addition, some special NBFCs and housing finance companies are currently getting at a low price, but they can see good growth in future.
Apart from banking, construction and engineering, chemicals, automobiles and auto parts, and sectors like metals and mining can also be good options for investment. Super Folio is special because it has the same companies which have the benefit of tremendous growth, strong business models and being available at the right price. This is the reason why this folio has the ability to give tremendous returns for the long term.
Must remember these things before investing
Omnisins Capital advises that any investor should invest at least 20 companies and not invest more than 5% in any one company. Also, putting money in 4-6 different sectors can prove to be more beneficial.