Small-Cap Surges 7% from Year’s Low; Investors Eyeing on a '60% Rally'!

  • Stock Market Analysis

While there has been a massive increase in investors’ demand for frontline stocks in the recent past, leading the benchmark indices to multi-month highs, an interest in small caps is also there. While the broader market index Nifty 50 is up 0.65% to 17,940 by 12:59 PM IST, the NIFTY Smallcap 100 index is slightly outperforming with its 0.75% gain to 9,582.

One small-cap stock that is raking up high intraday gains on account of heavy demand is DCM Ltd (NS: DCML ). It is a conglomerate and runs multiple businesses under its umbrella - from textiles to IT services to real estate and others. The market capitalization of DCM is less than INR 100 crores and therefore is an attraction for high-risk takers. 

The financial year 2022 has proven to be a turnaround year for the company. It recorded a 116.9% YoY jump in consolidated revenue to INR 112.32 crores, but the net income surged by 269.1% to INR 30.17 crores in the same period. In fact, it is the first profitable year for the company after FY16. The EPS has also jumped to 16.15, which is the highest ever, at least since 2013. Another good thing about this company is all of the promotor’s holdings which is around 48.5% are unpledged.

Image Description: Daily chart of DCM with volume bars at the bottom

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Coming to the chart, the share price of DCM has shown a good rally of around 7% to the last traded price of INR 49. This price rise has also been accompanied by a volume expansion, however, a higher volume spike would be preferred. A total of 213K shares have exchanged hands today so far which is almost the 10-day average volume and the highest since 3 August 2022.

More importantly, the stock is rising from highly oversold levels as it is finally attempting a meaningful recovery amid a severe beating. The stock tanked from a 52-week high of INR 146, marked in January this year, straight to a low of INR 43 this month. That’s a fall of around 70.5% in a mere 7 months. 

As the stock is now trading at a massive discount to its 52-week high, coupled with a turnaround year (FY22), it is probably making investors place some high-risk bets. The current momentum might easily lead the stock to the previous peak of INR 52.6, marked earlier this month. But if an attempt to recover continues beyond this, then probably the recent low would become an intermediate bottom and a rally to INR 80 might materialize in a few months, as there is no meaningful resistance below this level.  

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  • Gopi Nath @Gopi Nath
    Good analysis bro..
    Like 0

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