Brokerages Are Most Confident About These Five Small-Cap Stocks

The small caps faced the worst rout in seven years in 2018. Still, analysts are bullish on some of the stocks from the category.

Of the 255 Indian companies tracked by at least 10 analysts, only Redington (India) Ltd., PNC Infratech Ltd., Ashoka Buildcon Ltd., Music Broadcast Ltd. and KEI Industries Ltd. have a 100 percent ‘Buy’. Also, analysts expect these stocks to gain more than 20 percent this year, according to Bloomberg data. The stocks selected are classified as small caps as per Securities and Exchange Board of India’s guidelines.

The markets remained volatile last year on account of mutual fund reclassification, higher oil prices, escalating trade tensions between the U.S. and China, weaker rupee and liquidity crisis among non-bank lenders. That led to a nearly 23 percent fall in the BSE SmallCap 100 Index—its worst yearly return since 2011 when it fell nearly 36.5 percent.

Here are the reasons why analysts are most bullish on these five small caps:

• Redington India: Analysts expect strong growth demand in overseas business and improving domestic operations to help India’s largest distributor of Apple products.
• PNC Infratech: Strong operational profitability, healthy order book and financial closure of the hybrid annuity model projects will aid the construction engineering company.
• Ashoka Buildcon: Healthy order book, strong execution and scaling up of city gas distribution business key for the infrastructure company.
• Music Broadcast: A strong second half of the financial year due to delayed festive season and increase in government spending in the election year is expected to help the owner of FM brand Radio City.
• KEI Industries: Robust order book, strong growth in retail sales and increase in FY19 guidance key for the power cable maker.

The reasons have been compiled from the research reports by brokerages, including Elara Capital, Edelweiss and Anand Rathi.