Indian equities have endured a difficult year since last Diwali, with the Nifty losing more than 11% of its value. Yet, beneath the weakness in benchmark indices, 60 stocks have doubled investors' money, with some delivering returns as high as 650% during the same period.
The Nifty has fallen 11% since the last Diwali, while the Smallcap 100 has fared better, gaining 2.8%. An analysis of stock returns since last Diwali shows that 60 companies have delivered gains exceeding 100%, outperforming both the benchmark and the broader smallcap index.
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Sterlite Technologies leads with 650% rally
Sterlite Technologies emerged as the biggest winner in the list, with its shares surging 649.7% since the last Diwali. The optical connectivity and digital infrastructure company has benefited from growing investor interest in businesses linked to data centres, artificial intelligence and communications infrastructure.
Cupid followed with a 527% rally, while Sigma Advanced Systems gained 464.4%, making them the only three stocks in the list to deliver returns exceeding 400%.
Pharmaceutical stocks also featured prominently among the biggest winners. Bliss GVS Pharma surged 316.6%, while Kwality Pharmaceuticals gained 312.9%. Ind-Swift Laboratories advanced 259.6%, and Shilpa Medicare climbed 152.5%.
Defence, engineering and telecom stocks deliver big gains
Industrial and infrastructure-related companies were another major source of multibagger returns. Swan Defence and Heavy Industries gained 262.9%, while Shreeji Shipping Global climbed 248.5%.
MTAR Technologies, which operates in precision engineering, advanced 226.1%. Kabra Extrusiontechnik rose 211.6%, while Sansera Engineering gained 189.4%. Telecom equipment maker HFCL delivered a 214.9% return, while Welspun Corp rose 201.7%.
Consumer-facing companies also participated in the rally. Jewellery retailer Tribhovandas Bhimji Zaveri gained 246.8%, while Thangamayil Jewellery advanced 137%. Among the better-known new-age companies, electric two-wheeler manufacturer Ather Energy gained 114.9% during the period.
The breadth of these gains shows that opportunities emerged across industries, even though the overall market delivered disappointing returns.
Smallcaps outperform Nifty, but valuations remain elevated
The smallcap gain over the one year period stands in sharp contrast to the Nifty's decline. However, the relatively modest rise in the smallcap index also shows that the spectacular gains were concentrated in a limited number of companies.
Despite the broader market correction, valuations remain an important consideration for investors looking to enter the segment.
According to Sorbh Gupta, Head of Equity at Bajaj Asset Management, the market value of smallcap companies has increased 2.3 times since April 2023, compared with a 1.4-fold increase for largecaps.
The sharper appreciation has pushed smallcap valuations to 32.5 times trailing earnings, against 21 times for largecaps. Based on FY27 earnings estimates, smallcaps trade at 27 times earnings, compared with 20 times for largecaps.
However, valuations become more comparable when the analysis is restricted to domestic non-financial companies.
On this basis, smallcaps trade at around 30 times estimated FY27 earnings, compared with 33 times for largecaps, suggesting that valuations vary considerably depending on the companies and sectors being compared.
Should investors chase these multibaggers?
The strong performance of these 60 stocks comes amid considerable uncertainty in the broader equity market.
Investors continue to face risks from global geopolitical developments, elevated commodity prices, inflation and fluctuations in foreign investment flows.
Gupta said smallcap stocks can offer substantial long-term wealth-creation opportunities, although investors must account for their higher volatility and valuation risks. He suggested that investors considering exposure to the segment could evaluate a systematic investment plan with a five-year horizon, depending on their risk appetite and financial goals.
A disciplined approach could help investors manage volatility and avoid committing large amounts during periods of elevated valuations. The valuation gap also suggests that opportunities need to be assessed at the individual company level, particularly where earnings growth can justify current prices.
For investors, the performance of these multibaggers offers a reminder of the significant differences in returns within the Indian stock market.
The Nifty's decline since last Diwali has left benchmark investors with losses, while those holding the strongest-performing stocks have seen their investments multiply several times.
Whether these gains can continue will depend on earnings growth, valuations and the ability of individual companies to sustain their business momentum.
The challenge for investors entering after such sharp rallies is finding companies capable of delivering the next phase of growth without paying excessive prices for it.
Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.
