Is Small The New Big?

by: S&P Dow Jones Indices

By Koel Ghosh

The recent launch of our S&P Dow Jones Indices India Index Dashboard brought to my attention the S&P BSE Small Cap Index. While the month's report card was mostly green for the Indian indices due to the optimism in the Indian stock markets, the S&P BSE Small Cap Index did shine through.

  • The S&P BSE Small Cap Index returns as on May 30,2014 was 54.36% (based on total return index) and 51.69% (based on price Index). Further, its year to date return was 37.91% while it clocked in a one month return of 20.41%.
  • During the one year period ending May 30, 2014 the top 3 sectors attributing to this growth were Industrials, Materials and Consumer discretionary.
  • The top gainers contributing to the index growth in the one year ending May 30, 2014 were PMC Fincorp Limited and Sulabh Engineers & Services Ltd. with the top 10 list provided below
Security Name Stock Price Change (%) Stock Total Return (%) Contribution To Index Return
PMC Fincorp Limited 501.07% 501.66% 2.23%
Sulabh Engineers & Services Ltd. 212.82% 212.82% 1.41%
Risa International Ltd. 110.47% 110.47% 1.19%
Amtek Auto Limited 178.94% 179.95% 1.12%
Tilak Finance Limited 190.74% 190.74% 1.11%
CCL International Limited 275.42% 275.42% 1.05%
Kelvin Fincap Ltd. 254.49% 254.49% 1.02%
Sintex Industries Limited 329.37% 329.37% 0.95%
VA Tech Wabag Limited 155.53% 159.54% 0.95%
PTC India Limited 97.36% 97.36% 0.90%

Source: Asia Index Pvt. Ltd. Holdings Data as of S&P BSE Small Cap 31 May 2013 through 30 May 2014

If we compare the S&P BSE Small Cap Index with the benchmark S&P BSE SENSEX or even the broad market representative S&P BSE 500 for this one year period, the outperformance to both these broad market indices is clear.

Source: Asia Index Private Limited, One year total return Performance for the period ending 30 May, 2014

Indices One year Total Returns %
S&P BSE SENSEX (TR) 24.04%
S&P BSE 500 (TR) 25.52%

Source: Asia Index Private Limited. One year returns for the one year period from 31 May 2013 to 30 May 2014

S&P BSE Small Cap Index
Annualized Total Returns 54.37%
Annualized Standard Deviation 15.17%
Return per unit of risk 3.58

The S&P BSE Small Cap performance since inception has been 23.75% (Total return performance dated April 1, 2003 to May 30, 2014)

This sector is definitely displaying a new trend and one always needs to put this in perspective with the long-term performance statistics to get a good understanding of overall performance.

Capturing sector performance can easily be done through passive investing, which again highlights the advantages of passive investing. Passive or Index Investing allows investors to get access to such index returns with very little effort and the trends in the sector are easily tracked through its historical performance. In India, the trend of index investing is just about picking up with the existing offering in index funds and ETFs.

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