This is Basant Maheshwari's advice on how to make big money from smallcaps

 This is Basant Maheshwari's advice on how to make big money from smallcaps

Wealth expert Basant Maheshwari advises investors to examine the business model of a small-cap company to know its market performance in the near future.

Wealth expert Basant Maheshwari believes that to identify whether a small cap stock will make money or lose money, one should look at the business model of the company rather than its management.

The veteran fund manager said investors need to track the success of the business model to understand whether the company will deliver good returns in the future. To know whether the business model will work in the Indian scenario or not, he advised investors to simply check whether it is working in the USA. If not possible, find out about US-based companies with similar business models, he said in a recent interview posted through his Twitter account.

“What works in America usually works in India and you have a lag of 10-15 years because things happen first in America, 10-15 years later in India,” he said. So you can go and see whether the business model has been able to work in America or not. If it works then there are high chances that it will work in India also. So these are the broad framework within which we have made this plan of our company. Basant Maheshwari said. He also added that his company invests around ₹10-15 lakh every month in small-cap stocks through BM Small Cap Secular Growth Smallcase.

The Small-Cap Investment Plan of his company consists of shares of 15 companies. The plan also covers home improvement and home finance companies.

The 2 Big Bets of Spring - Pantaloons Retail, page end

Basant Maheshwari said in the interview that he had bought Pantaloon in 2003 when it was a ₹75 crore market-cap company. After this, its price increased tremendously. However, Pantaloon Retail went bankrupt.

The stock of another company - Page Industries - he bought when its m-cap was ₹350 crore. Now, it is worth ₹45,000 crore.

Don't be stubborn with what you buy

To invest in small-cap companies, one needs to have strong beliefs in the game as well. However, Basant Maheshwari advises one not to be choosy about the small-cap stocks one has invested in. He says that for small retail investors, there is always an option of easy exit and easy entry. So he advises investors not to be stubborn about what they have bought. "You don't fight a small cap company that is not doing well, you try and exit it," Maheshwari said.

bull market and smallcap

Smallcaps do well when there is a huge rally in the market. These companies have better growth prospects as compared to their peers in the large-cap category. He expressed that small-cap consumer companies do well in comparison to small-cap firms from other sectors. Basant Maheshwari also asked investors to stay away from PSU bank stocks. Despite Nifty Bank's impressive performance, he said, "In times like these, you see small-cap PSU banks hitting the top 20% circuit, but those stocks haven't moved in 15 years. So how do you know that today is the day for you to buy a XYZ PSU bank to make it such a small cap."

He also advised to avoid investing in small-cap textile companies and small-cap metals. He said that small cap cement plants are performing normally.