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Finance GlossarySmall Cap Stocks
Small Cap Stocks
Definition of Small Cap Stocks
Small cap stocks are the shares of companies that have a market capitalisation below INR 5,000 crore. Often, these companies have a high growth potential, but tend to be more volatile and riskier compared to large cap stocks. In favourable markets, small cap stocks can deliver impressive returns. However, they tend to react sharply to economic changes. Investors must carefully research and consider their risk tolerance before investing in small cap stocks.
Related Terms
Convertible Debentures
A convertible debenture is a long term debt instrument that can be converted into equity on maturity. Convertible debentures are generally unsecured loans that small to mid-size companies take on in exchange for an interest rate.
At The Opening
At the opening is an instruction to execute an order at the open price, which is the price of a security at the start of regular stock market hours.
Runaway Gap
A runway gap or a continuation gap sometimes appears in the middle of a strong price trend. It reflects that the stock price is gaining sustained momentum. Often, these gaps show up when traders rush in. As a result, the prices can move sharply higher or lower. A runaway gap sends a strong signal to those who follow trends. It confirms the strength in price and suggests that the healthy momentum may continue for some time.
Comparable Company Analysis
Comparable Company Analysis (CCA) is a method used to evaluate a company’s value by comparing its essential metrics like EBIT, EBITA, and more with other companies.
The underlying assumption of CCA or “Comps” is that publicly traded companies from the same sector or industry will have similar metrics that are comparable.
The underlying assumption of CCA or “Comps” is that publicly traded companies from the same sector or industry will have similar metrics that are comparable.
Non-Cyclical Stocks
Non-Cyclical Stocks are shares of companies whose performance is relatively stable regardless of economic ups and downs. These businesses provide essential goods or services, so demand remains steady even during slow economic periods, making such stocks less volatile than cyclical stocks.
Weighting
Weighting refers to the proportion of an asset or security within a portfolio or index. For example, in a market index where one stock has a 10% weighting, its price movement has a greater impact on the index’s overall performance compared to stocks with smaller weightings.
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