02/12/2023
*Small Cap NFO*
*5th Dec - 19th Dec*
*Think Big, Start Small*
🎯 *Why Small Cap?*
1. *High Growth Potential:*
Small caps historically outperform during economic upswings. Between FY03-08, and FY19-23 small cap earnings surpassed large and mid-caps, foreshadowing higher potential
2. *Expanding Market Cap:*
Market cap of 251st company 20 years ago was 459Crs whereas 251st company today has a market cap of ~17kCrs; a 38X increase
3. *Under-Researched Gems:*
Approximately 415 small cap stocks have no analyst coverage, offering opportunities for early identification through professional research.
4. *Differentiated Sectors:*
Opportunity to invest in segments which are underrepresented in large caps
5. *Vast Investible Universe:*
537 companies have a market cap above 2,000 Cr, there's fertile ground for generating alpha in the small cap space
📈 *Why Small Cap Now?*
1. *Reduced volatility in the index:*
Small caps have witnessed consistent earnings growth, reducing volatility from 22.8% to 18.4% over recent years, earnings compounded by 49% in the last 3 years.
2. *Improved Balance Sheets:*
Net debt-to-equity ratio declined from 0.76x (FY15) to 0.3x (FY23), indicating reduced risk associated with balance sheets.
3. *Influx of Retail Investments:*
Since 2020, small cap mutual funds witnessed an increase to 26% from 15% in net flows, especially through SIPs, suggesting resilience against extreme volatility.
4. *Reasonable Valuations:*
Current small cap P/E ratio (24.7x) is well below its peak (33.0x), indicating reasonable valuations despite the index's returns which could relieve concerns
5. *Election Trends:*
Historical data indicates buoyancy in small caps in the six months run up to general elections results, potentially hinting at upcoming upward momentum.
🏅 *Why Motilal Oswal Small Cap?*
1. *Proven Expertise:*
MOAMC boasts a two-decade track record in identifying multi-baggers within the small cap space. Motilal Oswal AMC holds ~9,000 Cr small caps in their Active Funds which is ~22% of their total equity holdings
2. *QGLP Philosophy:*
Their core philosophy of Quality, Growth, Longevity, and Price reinforces high-quality, high-growth portfolios, ensuring potential long-term financial success.
3. *Strong Commitment:*
With prop investments exceeding 5,000 crores across their funds, MOAMC displays strong conviction in their strategies. This NFO will also have a commitment from the promoter
4. *High Growth Themes*
MOAMC invests in house identified tail-winded themes focused towards domestic market, indigenization and capital goods which are potential leaders of current market cycle
5. *High Conviction Fund:*
Emphasis on high-conviction investing reflects unwavering belief in their investment choices, aligning with investor success.
6. *Investment team Expertise:*
Our fund manager has over 18 years of vintage in financial services, fund management experience predominantly in small cap strategies.
Regards
VISHAL VERMA
VNFINSERV
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