Introduction

The question arises: why haven't proven investors invested in some of the most prominent stocks in the Indian share market, such as HDFC, TCS, and others? While these are indeed large-cap companies, the reason beyond their current status lies in the potential of growth in smaller market segments.

Large-cap vs. Small-cap and Mid-cap Companies

Large-cap companies, by virtue of their current position, are already at the peak of their growth potential. However, this does not mean that their growth ceases entirely. Rather, the probability of significant growth becomes lower. Investors often look at small-cap and mid-cap companies as they have the potential to outperform the market and make a substantial return on investment.

To put this into perspective, consider the example of Titan, a well-known Indian company. Rakesh Jhunjhunwala, a revered investor, invested in Titan when it was a small-cap. At that time, the stock price was around 7 INR. Now, Titan operates as a large-cap company, and its stock price stands at around 2000 INR. This demonstrates the tremendous return that can be achieved through astute investment in smaller companies that have the potential to grow significantly.

Investment Wisdom from Notable Investors

Investors like Mr. Vijay Kedia have echoed the importance of investing in small-cap and mid-cap companies. Kedia, a notable figure in the Indian investment community, emphasizes that good small and mid-cap companies have the potential to become large-cap companies in the future. His insights highlight the wisdom of choosing stocks based on their growth potential rather than their current market capitalization.

When asked about investment choices, many individuals suggest investing in companies listed in the Nifty-50, which includes large-cap names such as TATA and Adani. However, even these large-cap companies can face significant market fluctuations. For instance, in the midst of the COVID-19 pandemic, Reliance, once valued at 1600 INR, dipped to 870 INR within a short period, which is nearly a 45% decrease. This illustrates the volatility of the market and the importance of a diversified portfolio.

Market Volatility and the Role of Small and Mid-cap Stocks

Market volatility is not unique to any specific investment segment. During the height of the pandemic, many so-called 'best stocks' experienced significant fluctuations, illustrating that no stock is immune to market conditions. It is essential to maintain a long-term perspective in investments to mitigate risks and maximize returns.

Investors who rode on the dip of these stocks, acquiring them at lower prices, often ended up benefiting more than those who invested earlier when the stock prices were higher. The lesson here is that the best stock isn't always the one that is currently performing well; it is the one that aligns with your investment strategy and potential growth prospects.

Conclusion

In conclusion, the best stock is not a static entity but evolves based on market conditions, investor strategies, and the potential for growth. While large-cap companies like HDFC and TCS may seem secure and stable, taking a closer look at smaller companies can offer substantial returns. Proven investors recognize the importance of identifying companies with growth potential and are not bound by the metrics of current market capitalization. By diversifying their portfolios and focusing on smaller companies, they can reap significant rewards in the long run.