SME Stocks Offer Unmatched Growth Potential
Dalal Street Investment Journal|September 28, 2020
SME Stocks Offer Unmatched Growth Potential
SME investing has rewarded risk-takers in the past and as the family of SME stocks increases every year, the prospects of SME investing gets even better. Ganesh Vaybase tracks the SME stocks’ performance and highlights the top performers in the SME space while also discussing why SME investing is in vogue
Ganesh Vaybase

SME (small-medium enterprises) investing is not new to market participants now that both the platforms i.e. BSE SME and NSE Emerge platforms are quite vibrant and regularly getting increasingly new businesses (SME) listed on the platform. Traditionally, the micro-caps and small-caps have been the favourite hunting ground for retail investors. SME investing has not come to that level yet in terms of popularity yet it is slowly making some ground for itself. Steadily, more and more SME stocks are getting listed on the SME platform and several SME stocks are getting migrated to the mainboard, which is a sign of success for those involved in the whole process, including the stock exchanges, companies, investors and the regulators.

SME stocks are nano-cap stocks and can help investors tap some abnormal growth opportunities in the equity markets. However, before investing in SME stocks it is vital for investors to understand the role that SMEs play in the economy. SMEs in India are crucial to the economy as the sector produces a diverse range of products and services while contributing to value-addition across sectors in India. Experts call SMEs the backbone of India that drives the overall economic growth of the country. SMEs contribute substantially to the employment generation in the country too. In fact, the SME sector in India is one of the biggest beneficiaries of various initiatives such as ‘Make in India’, ‘Start-Up India’, ‘Mudra Yojana’ and ‘Skill India’.

SMEs are viewed as important by the government because the sector is considered to be the catalyst to socio-economic transformation in India. The service sector in SMEs has a higher share in India’s GDP compared to the manufacturing sector. Healthy contribution to total exports is one of the reasons why the SME sector is considered vital from India’s point of view. SME investing provides investors with a unique opportunity to tap the unmatched growth potential provided by the sector. The BSE SME and NSE Emerge platforms help investors participate in the growth story of the SME sector in India.

SME Indices

It will excite investors to know that we now have a Nifty SME Emerge index that captures the performance of select liquid SME stocks listed on the NSE Emerge platform. The constituents of the NSE SME Emerge are selected based on their free-float market capitalisation. The index is reconstituted on a quarterly basis and can be used by market participants to gauge the performance of the SME stocks in India.

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September 28, 2020