Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.83% while the Hang Seng is up 0.59%. The Shanghai Composite is trading down by 0.1%. Overnight, US and European markets closed lower.

Meanwhile, Indian share markets too have opened the day higher. BSE Sensex is trading higher by 131 points and NSE Nifty is trading higher by 28 points. S&P BSE Mid Cap and S&P BSE Small Cap are trading up by 0.6% respectively. Gains are largely seen in energy stocks and capital good stocks. The rupee is trading at Rs 65.37 against the US$.

Small caps have comfortably outperformed the Large caps and how. The BSE Small Cap Index has returned 21.7% in FY18 compared to 12.5% by BSE 100 and 11.7% by the Sensex.

Small Caps – Outperformers in Current Financial Year

Expectedly, valuations of certain Small cap companies have gone through the roof. It is important to understand the highly volatile nature of these stocks. In a downturn, these stocks tend to move in the opposite direction much faster as well.

While there, undoubtedly, lies hidden opportunities in the small cap space, it is important to focus on fundamentals of these stocks. Next, assess if they have the potential to move on to the ‘Safe stock’ category in the future.

In news from oil & gas sector. As per an article in The Livemint, Oil and Natural Gas Corp. Ltd (ONGC) and Vedanta Ltd on Wednesday emerged as the biggest bidders for oil and gas blocks, putting in 41 out of 56 bids received in India’s maiden auction under open acreage licensing regime.

ONGC put in expression of interest for 41 areas while Vedanta’s oil unit, Cairn India sought rights over 15 areas.

India in July opened 2.8 million sq. km of sedimentary basins for oil and gas exploration in a bid to raise domestic production and cut excessive dependence on imports. The open acreage licensing (OAL) allows companies to select blocks or areas after studying seismic data to explore and produce oil and gas.