Undeterred by regulatory concerns around valuations and manipulation in some counters, the SME-IPO index hit a fresh lifetime high of 66,396.09 points on Wednesday. The index has risen nearly 26% so far in April – its best month since December 2021 when the index zoomed by 60%.
The renewed interest in SMEs came in April after it went through a lean period in March when the index fell 10.8% after the Securities and Exchange Board of India chairperson Madhabi Puri Buch sounded alarm bells about the segment’s overwhelming performance in the past couple of years.
On Wednesday, the index rose for the fifth consecutive session and ended 1.9%. Among the top gainers were Shri Balaji Valve Components, Gconnect Logitech and Supply Chain, Retina Paints, Sunita Tools, and Sonalis Consumer Products.
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Over the last couple of years, a flurry of small-and-medium enterprises (SMEs) have made their debut on the SME platform of BSE and the National Stock Exchange of India. Many of them have given bumper returns to investors, with some stocks even doubling on the listing day.
In the first three months of 2024, Rs 2,012 crore has been raised from the SME market. In 2023, Rs 4,686 crore was raised through SME platforms, which was 2.5x the amount raised in 2022. This was also the highest ever fundraise through SME platforms in a year since the platforms’ launch in 2012.
Divam Sharma, founder and fund manager at Green Portfolio, said there is likely more steam left in the space as many new companies are lining up for listing over the coming quarters. However, Sharma said the investors need to pick the companies with strong fundamentals, business models, and corporate governance.
Unlike the mainboard listings, companies listing on SME platform do not have to follow stringent norms. The norms for minimum issue size, disclosure requirements, etc are relaxed for SME listings.
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Nevertheless, it is not just the SME platform stocks that have been seeing a rally. Even the mainboard stocks have been seeing strong gains, particularly small-cap stocks.
The BSE Smallcap index has risen 8.6% so far this month and also hit fresh lifetime high on Tuesday. The small-cap index also had seen correction in March.
Market participants are largely optimistic about the prospects of the SME segment, though many are advising caution when it comes to picking stocks. Some fund managers recommended that investors book profits from time-to-time to safeguard themselves against unforeseen slump.
