Stock Market News: Sign of a boom in the stock market – these stocks can increase by up to 90 percent.

News Topical, Digital Desk : According to Samit Vartak, small-cap stocks could see a gain of up to 90 percent over the next two years once the current cycle bottoms out. He is the founder and CIO of SageOne Investment and believes the market is nearing the end of an 18-month correction phase.

Signs of a Strong Recovery in Small Caps
That historical trends indicate that small caps tend to see a strong recovery after a prolonged downturn. He added that the average, or minimum, upside during this bottom-to-top phase is approximately 92 percent. However, he also added that these are indications based on probabilities, not guarantees.

According to him, the current market is showing signs of stability. Dalal Street has seen a rally for the second consecutive week, and benchmark indices have risen by more than one percent. Midcaps outperformed, gaining nearly 4 percent. All sector indices, except auto, closed in the green. Investor wealth increased by approximately ₹14 lakh crore this week. Samit Vartak said that the current situation reflects several factors that typically occur at the bottom of a cycle. These include the end of a small-cap correction, weak seasonal trends, and global uncertainty.

The small-cap cycle lasts 2.5 to 4 years.
He said that when these three major factors come together, it's time to seize opportunities in the market. He also explained that the small-cap cycle typically lasts 2.5 to 4 years, and the correction lasts 9 to 18 months. After reaching its peak around September 2024, the market is now entering the final phase of the correction, creating the possibility of a turning point.

Despite concerns about global growth and commodity prices, he said the market is looking ahead. He said the market will digest the situation in a few weeks, and if the situation doesn't worsen, the outlook for small caps could improve. Regarding portfolio strategy, he said investors should remain invested throughout the cycle and avoid cash calls. His focus is on companies that can deliver at least 20 percent earnings growth over the next 2 to 3 years.

These are the sectors with opportunities.
He said that instead of exiting the market during a downturn, it is better to shift investments to sectors where valuations have fallen significantly. He described managed office space, real estate linked plays, solar modules, export-oriented businesses, and some financials as sectors with opportunities. Despite a decline of 30 to 50 percent, many of these sectors still have the potential for strong growth.

Read More: Stock Market News: Sign of a boom in the stock market – these stocks can increase by up to 90 percent.