SME Stocks Are Creating Wealth!

The SME IPO index is designed to measure the performance of the small and medium enterprises (SME) listed on the BSE SME platform after the completion of their initial public offering (IPO).

We have seen in the past one year that several SME stocks have been catching investors’ attention. Is it the right time to consider such stocks? Yogesh Supekar shares a fresh perspective on SME stocks and suggests how one can deal with them profitably while also highlighting the challenges that lie therein. 

If you believe in the adage ‘small is beautiful’ as applied to the equity market, you must be talking about micro-cap companies. Micro-cap investing is luring investors with high-risk appetite with unmatched returns. The downside in micro-caps can be huge and at times there is lack of liquidity in the stocks, which essentially means that it may be difficult to liquidate the position. Now that is something called ‘known risk’ while investing in micro-cap companies. Investors who participate in equity markets are usually believed to understand the risks involved in investing. The question is whether all the investors who participate in illiquid stocks accurately understand the risks involved.