Top 3 small-cap stocks to watch in October 2023

September proved to be a surprising month for the market. After consistently reaching new highs, the market experienced nerve-wracking volatility in the second half of the month due to global uncertainty, a spike in crude oil prices, and relentless selling by foreign institutional investors (FIIs).

FIIs have been net sellers to the tune of Rs 25,006 crore month-to-date in September. It’s worth noting that they were also net sellers in August 2023, with sales amounting to Rs 20,620.65 crore. Speaking of the hawkish stance of the US Federal Reserve: while the Fed announced no change in the Fed Funds Rate, their guidance on future rates suggests a strong possibility of rate hikes, with at least one expected before the end of the year. Market positioning indicates that investors still see a nearly 40% probability of the Fed opting for one more 25 basis point (bps) interest-rate hike by year-end, according to the CME Group FedWatch Tool.

October is set to be a critical month for market participants, with the RBI policy announcement scheduled and a slew of economic data releases expected in the first half of the month. Additionally, earnings season will commence. We are here to simplify the challenging task of selecting the top three stocks from the small-cap segment for your watchlist.

Here are the top three small-cap stocks to keep an eye on in October:

1. Gujarat State Fertilizers & Chemicals Ltd (GSFC)

Historical data shows that, on average, this stock has delivered gains of 9.72% in October, with a positivity rate of 76%. Out of 21 instances, it has ended positively on 16 occasions. Interestingly, the stock has witnessed nine consecutive positive years. Hence, it is advisable to closely monitor this stock.

2. Manappuram Finance Ltd

Historical performance suggests that this stock might deliver a robust performance in October, as it has closed positively in 15 out of the past 20 times. The stock’s average return in October is 14.13%.

3. Kabra Extrusiontechnik Ltd

Historical data indicates the potential for strong performance in October, with a positivity rate of 71% for this month. It has closed positively in 15 out of the past 21 instances, with an average return of 14.13% in October.

These small-cap stocks present promising opportunities for the month ahead. Keep a close watch on them.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.