Top Performing Smallcap Stocks of 2023 So Far

We're two months into 2023 and Indian benchmark BSE Sensex has, so far, outperformed the BSE Smallcap index by falling just 1.7%. In comparison, the smallcap index is down 4%.

Despite the lackluster performance due to the recent volatility in Adani group stocks , there are some small-cap stocks that have delivered high double-digit returns.

History has shown that select small-cap stocks have delivered more than 100% returns to investors during market recoveries.

Today, let's take a look at the top performing small-cap stocks of 2023 so far. In just two months, these smallcaps have rallied up to 60% and some even look set to rally further.

Let's find out.

#1 WPIL

First on the list is WPIL.

WPIL manufactures solid handling pumps, stock pumps, horizontal split casing centrifugal pumps, vertical submersible pumps, and vertical submersible motors. The company also manufactures grey iron castings and sluice pumps.

In 2023 so far (between 1 January 2023 and 2 March 2023), the stock has already rallied 58%.

The strong rally comes on the back of strong December quarter 2022 results, where WPIL reported a profit after tax (PAT) growth of 459% on a year-on-year (YoY) basis. Profit came in at Rs 149 million (m) on the back of solid revenue growth of 111%.

The revenue growth was driven by the international business and the turnkey business.

With a healthy business outlook and an order book of Rs 33.4 bn as of December 2022, the company is expected to further receive a boost. This is especially because of the increasing government focus on the Jal Jeevan Mission.

To keep up with expansion plan, WPIL aims to seize plans for a new reactor.

For more details, see WPIL company fact sheet and quarterly results.

#2 Zen Technologies

Second on the list is Zen Technologies.

The company designs, develops, and manufactures combat training solutions for training defence and security forces.

The group is the sole manufacturer of simulation training equipment and anti-drone systems in India. Basically it's one of the top companies in the exploding drone market.

In 2023 so far (between 1 January 2023 and 2 March 2023), the stock has rallied 57%.

The rally was sparked by a three-fold jump in the company's December quarter sales to Rs 520 million (m) from Rs 132 m a year back, further supported by a strong order book.

As of 31 December 2022, Zen Technologies has an order book position of Rs 4 bn.

It has secured a Rs 1.6 bn order from the Indian Air Force (IAF) to supply counter unmanned aircraft systems (CUAS). This is the company's first major order in the anti-drone space.

On the order book front, the management expects a few major order wins coming on the back of aggressive participation in various defence events.

Furthermore, the company expects a few more big order wins from aggressive purchases made by the Indian government.

For more details, see Zen Technologies company fact sheet and quarterly results.

#3 Nucleus Software Exports

Third on the list is Nucleus Software Exports.

Nucleus Software Exports specialises in the development and production of software systems, in addition to the supply of various support and technical advisory services.

Most of its products and services are centered on the banking and financial services sectors.

In 2023 so far (between 1 January 2023 and 2 March 2023), the stock has rallied 46%, hitting a 52-week high on 16 February 2023.

After a languishing performance in 2022, falling by 32% things have finally taken a turn and the company has announced its revenue target for 2023 with strong Q3 earnings.

For December 2022 quarter, it posted a 375% YoY surge in its consolidated net profit to Rs 380 m on the back of a 38.5% YoY rise in revenue to Rs 1.2 bn.

The company expects the quarterly revenue run rate to move to a new normal as customers are agreeing to the repricing.

It is also aggressively conducting discussions with some marquee names that are looking very keenly to start running businesses using Nucleus Software's intellectual property.

For more details, see the Nucleus Software company fact sheet and quarterly results.

#4 Sonata Software

Fourth on the list is Sonata Software.

Sonata offers IT services and product licensing & deployment services to its customers in the United States, Europe, the Middle East, and India.

The company provides IT services to travel, retail & commodities and manufacturing and software vendors.

In 2023 so far (between 1 January 2023 and 2 March 2023), the stock has rallied 42%, touching its 52-week high on 2 March 2023.

The stock has been on an uptrend ever since the company indicated it won four large deals from cloud transformation and customer experience modernisation.

The rally got a boost in the form of strong dollar revenue growth outlook.

Last month, it signed a definitive agreement to acquire a 100% stake in US-based Quant Systems.

This acquisition will add two new clients to the top-5 list of the company and will help expand its presence in the BFSI and healthcare verticals.

Going forward, on the back of continuous deal wins and strong digital spending by the clients, Sonata Software expects dollar revenue to grow at a CAGR of over 23.8% by 2025.

For more details, see the Sonata Software company fact sheet and quarterly results.

#5 Surya Roshni

Last on the list is Surya Roshni.

Surya Roshni is a multinational company headquartered in Delhi, India. The company produces fans, steel, lighting, LED, kitchen appliances, and PVC pipes.

Surya Roshni exports its products to more than 44 countries. It's one of the top manufacturers of LED lights in India.

In 2023 so far (between 1 January 2023 and 2 March 2023), the stock has rallied 42%.

A healthy business outlook is driving the rally it seems. The company is expected to receive a boost because of the increasing government focus on the electronics sector.

The government has taken various initiatives like Aatma Nirbhar Bharat Abhiyaan, Vocal for Local, and the PLI scheme for LED lighting products/components.

Surya Roshni saw a favourable demand outlook for PVC due to the government initiatives such as Housing for All, Nal se Jal, Project AMRUT, and Swachh Bharat Mission.

The demand outlook for non-agricultural pipes appears to be good, as the major urban real estate markets show signs of a sustained recovery.

For more details, see the Surya Roshni company fact sheet and quarterly results.

Which other smallcap stocks are off to a great start in 2023?

Apart from the above, here are other smallcap stocks which have started on a solid note.

Company	Gains in 2023 so far (%)
SEPC Ltd.	37%
GNA Axles Ltd.	37%
BF Investment Ltd.	36%
Cigniti Technologies Ltd.	34%
Pennar Industries Ltd.	30%
BCL Industries Ltd.	30%
Symphony Ltd.	30%
Apar Industries Ltd.	30%
Zensar Technologies Ltd.	30%
Finolex Cables Ltd.	29%
Newgen Software Technologies Ltd.	28%

Data Source: Ace Equity

As you're interested in smallcaps, check out our detailed guide on how to screen the best small-cap stocks.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...