The pattern of the markets cycle always involves some stocks which had been performing very well previously but have now been corrected by quite some percentage, thus giving birth to a new watchlist of discounted stocks. Currently, there are 20 small cap stocks which had lost 20% to 26% from their respective peaks being circulated amongst the retail traders.

 The first thing that a responsible investor needs to consider before buying even one share is whether the declining share price is a bargain or a correct pricing of risks by the market.

In this article, we’ll examine the list itself, clarify the meaning of the term “discount from high” as an investing signal, analyze the sectors represented in the list, and finally provide you with a framework to distinguish between bargains and falling knives. The content of this article is purely educational, and it is not a recommendation for investments; smallcap investing has above average risks. Please do your own research or consult a SEBI-registered advisor before investing in any stock.

20 Smallcap Stocks Down 20-26% From Their Highs

Discount figures are approximate, sourced from a stock screener, and can change daily depending on market movement. Always verify live prices before making any decision.

What “Discount From Recent High” Actually Means

 Stocks that have dropped 20-26 percent off their highs have just become cheaper in terms of price, but they haven’t become cheaper in terms of valuation, which is quite a different thing.

To illustrate this idea, take the case of a stock priced at 40 times its earnings per share (P/E ratio) that drops by 25 percent. Such stocks may be valued at 30 times earnings despite being historically expensive when compared to both their past performance and the rest of the industry. On the other hand, stocks valued at 15 times earnings that fall 10 percent could now be relatively cheap based on their earnings power.

In other words, a stock’s fall from high doesn’t say anything about its fundamental value. It only indicates that the stock has lost some momentum.

Why Do Smallcap Stocks Fall 20%+ From Their Highs?

There are generally three broad categories of reasons a stock corrects sharply from its highs, and figuring out which category a stock falls into is the single most important step before considering an entry.

1. Broad Market or Sector Rotation

Sometimes an entire sector cools off because of macro factors — interest rate expectations, commodity price cycles, global capex slowdowns, or simply profit booking after a strong rally. Stocks tied to India’s power transmission and capex cycle, for instance, saw a strong run-up over the past couple of years on the back of grid modernization and renewable energy investment themes; a pullback in several power-equipment and transformer names could reflect broader sector cooling rather than company-specific problems.

2. Company-Specific Fundamental Deterioration

Sometimes a stock falls because something has genuinely gone wrong — slowing revenue growth, margin compression, rising debt, promoter pledging, corporate governance concerns, or a weak quarterly result. In these cases, a lower price is not a discount; it’s the market adjusting expectations downward, and the stock could easily fall further.

3. Temporary Sentiment-Driven Overreaction

Occasionally, a fundamentally sound business gets caught in a broader smallcap sell-off or a single disappointing quarter that doesn’t reflect its longer-term trajectory. These situations can occasionally represent genuine opportunities, but distinguishing them from category 2 requires real diligence, not just a glance at a screener.

Sector-Wise Breakdown of This List

Looking at the 20 names above, they span several distinct themes, each with its own drivers and risks:

Power, Transmission & Capital Goods: TD Power Systems, GE Vernova T&D India, Voltamp Transformers, and Godawari Power & Ispat fall into this bucket. This sector rallied strongly on India’s power capex and grid-modernization theme; the recent pullback could reflect valuation normalization after a sharp run-up, execution concerns, or order-book timing issues. Order inflow trends and margin trajectory are worth tracking here.

Auto Ancillaries: Lumax Auto Technologies, Lumax Industries, ASK Automotive, and Banco Products represent the auto component space. This sector is closely tied to passenger vehicle and two-wheeler volumes, EV transition capex, and export demand. Weakness here often tracks auto OEM sales data and raw material (aluminum, steel) cost trends.

Energy & Mobility: Amara Raja Energy & Mobility operates in batteries and energy storage — a space under close watch given the shift toward lithium-ion technology and EV adoption, which creates both opportunity and disruption risk for traditional lead-acid battery makers.

Jewellery Retail: Khazanchi Jewellers and P N Gadgil Jewellers are both consumer-facing jewellery retailers. This sector is highly sensitive to gold price volatility, wedding-season demand cycles, and working capital intensity, all of which can drive sharp share price swings independent of underlying store-level performance.

Technology & Engineering Services: MTAR Technologies, MosChip Technologies, Axiscades Technologies, and IValue Infosolutions are technology and precision-engineering names. These businesses often trade on high growth expectations, so even a modest earnings miss or order delay can trigger an outsized price correction.

Specialty Chemicals & Pharma Ingredients: Tatva Chintan Pharma Chem represents the specialty chemicals space, a sector that saw a boom during 2021-22 and has since faced pricing pressure from Chinese competition and normalized demand.

Infrastructure & Real Estate: Anant Raj and Enviro Infra Engineers are tied to real estate and infrastructure/water treatment themes, sectors sensitive to interest rates, execution timelines, and government capex cycles.

Exchanges & Diversified: MCX, India’s leading commodity derivatives exchange, and Piccadily Agro Industries (spirits/agri) round out the list with more idiosyncratic, business-specific stories.

A Practical Checklist Before Buying Any “Discounted” Smallcap

Rather than buying based on the size of the discount alone, run each stock through a structured filter:

1. Why did it fall? Read the last two quarterly earnings call transcripts or management commentary. Was there a specific trigger — a margin miss, order cancellation, regulatory issue — or is the fall part of a sector-wide move?
2. Check valuation, not just price. Compare current P/E, P/B, and EV/EBITDA multiples against the stock’s own 3-5 year historical average and against sector peers. A stock “down 25%” that’s still trading above its historical average multiple isn’t necessarily cheap.
3. Look at earnings growth trajectory. Is revenue and profit growth decelerating, flat, or still intact? A falling price alongside falling earnings estimates is a red flag, not an opportunity.
4. Assess balance sheet health. Check debt-to-equity trends, interest coverage, and working capital cycles — especially important for capex-heavy sectors like power equipment and capital-intensive businesses like jewellery retail.
5. Watch promoter and institutional activity. Rising promoter pledging, insider selling, or FII/DII outflows alongside a price decline can signal deeper concerns than what’s visible on the surface.
6. Understand sector cyclicality. Auto ancillaries, chemicals, and capital goods are cyclical businesses. A 20-26% drop may simply reflect a cyclical trough rather than a permanent value opportunity — timing matters as much as valuation.
7. Size your position appropriately. Smallcaps are inherently more volatile and less liquid than largecaps. Even a fundamentally sound idea deserves a smaller position size, given the wider range of possible outcomes.

Discount Screeners Are a Starting Point, Not a Strategy

Such lists are valuable in coming up with ideas as they provide a stock that has made a significant move and deserves more attention. However, seeing the “20% off” label as an automatic buying point fails to take the most critical aspect of investing: conducting independent research on the stock to see if the business warrants being priced above its market level.

Smallcap stocks, by definition, are highly volatile, less covered by analysts, have low liquidity, and are more susceptible to company-specific as well as general market trends. In that regard, the spread between potential outcomes, whether recoveries or drops, is much wider than in the case of largecap stocks.

Frequently Asked Questions

Is a stock down 20% from its high always a good buying opportunity?

No. A price decline only tells you the stock is cheaper than before — not that it is undervalued relative to its business fundamentals. Some declines are justified by deteriorating fundamentals.

What’s the difference between “fall from high” and “value investing”?

Value investing involves comparing a company’s price to metrics like earnings, book value, and cash flows to judge whether it’s genuinely undervalued. Falling from a high is purely a price-momentum observation and doesn’t account for valuation at all.

Are smallcap stocks riskier than largecap stocks?

Generally, yes. Smallcaps tend to have lower liquidity, less analyst coverage, higher earnings volatility, and can see sharper price swings in both directions compared to largecap, more established companies.

Should I consult a financial advisor before investing in these stocks?

Yes. This article is for informational and educational purposes only and does not constitute investment advice. Since individual circumstances, risk tolerance, and financial goals vary, consulting a SEBI-registered investment advisor is recommended before making any investment decisions.

Conclusion

The 20 smallcap stocks in this list — spanning power equipment, auto ancillaries, jewellery, technology, chemicals, and infrastructure — have each corrected 20-26% from their recent highs. Some of these declines may reflect temporary sector rotation or sentiment-driven overreaction; others may reflect genuine, ongoing fundamental challenges. The percentage discount alone cannot tell you which is which.

The smarter approach is to use this list as a research starting point: dig into each company’s recent earnings, valuation history, balance sheet, and sector dynamics before drawing any conclusions. In investing, price is what you pay — but value is something you have to work out for yourself.

In case you have been interacting with Indian investors recently, then chances are high that at least one person would have talked to you about buying shares from a company “before it goes public”. The name of the pre-IPO fintech companies, popular e-commerce firms, or known private manufacturers will definitely be mentioned here. What we’re discussing in such cases is generally the world of investment in unlisted shares.

In this article, we will define the concept of unlisted shares, explain the procedure of trading in them, reasons behind some companies not going public for years, risks involved, their valuation, and taxation process in an easy-to-understand way.

What are unlisted shares precisely?

Any organization issuing shares divides its ownership into smaller units. If the ownership units get listed on an exchange, which, in the case of Indian stock exchanges, is either the BSE or the NSE, then the shares are known as listed shares. All one needs for buying and selling such shares is a demat account and trading application and they can execute trades instantly during the stock market hours.

Unlisted shares are quite different from this. They belong to companies whose stocks have not been listed on any stock exchanges. The fact that a stock is unlisted does not mean that the company is not legitimate or that it is unsuccessful because many unlisted companies have a lot of success and business behind them. It simply means that there has been no listing of these shares on a stock exchange yet.

As there is no role of an exchange in an unlisted share transaction, the process of trading these shares becomes quite different from conventional stock trading. There is no price discovery system, order matching system, and no certainty of a buyer or seller being available when you want one.

The Three Categories of Unlisted Companies

There are different types of unlisted companies and they can be sorted into three main groups.

1. Strictly private companies. These are all kinds of businesses from a family-owned manufacturing company to a rapidly developing start-up firm which has never issued its stocks to the general public nor plans to do it anytime soon. Stocks of these companies belong to founders, early employees and a few investors including angels and venture capital firms.
2. Companies getting ready for an IPO (pre-IPO companies). This is an advanced group of private firms which are going to go public and release an Initial Public Offering sometime in the nearest future. Since there is real expectation concerning the debut of these companies on the stock exchange, their stocks attract the biggest interest of investors who try to enter the game at the beginning.
3. Delisted companies. Delisted firms refer to those that traded previously in an exchange but later got delisted from the exchange due to various reasons, which include voluntarily, where the promoters buyout all public shares to make the firm private once again, or involuntarily, due to non-compliance with listing and accounting practices in the exchange.

How the Unlisted Share Market Really Works?

As the deal-making is not carried out at any centralized market place, it is useful for you to know the real mechanism of this process.

But Who Actually Owns These Shares?

The ownership of unlisted shares belongs to a relatively small circle of people: founders, ESOP shareholders (employees of the company who got stocks as a part of employee stock ownership plan) and institutional shareholders such as venture capital or private equity funds, as well as individual angel investors who contributed money to the company in its early days.

Though such companies do not need to fulfill the requirements of constant and ongoing disclosure imposed on listed companies, they cannot operate in a legal vacuum – they are obliged to adhere to provisions of the Companies Act, submit returns in accordance with the Companies Act to the Registrar of Companies from the Ministry of Corporate Affairs, to follow taxation laws and if applicable – to follow regulations of FEMA. In case of initial public offering, the rules of SEBI will apply.

Price Determination

This may well be the most significant mental change for someone accustomed to normal equity trading. In an exchange, the price of a share is determined through the competition of thousands of buyers and sellers in real-time. However, in an unlisted stock market, there is no such process. Rather, it is the process where a buyer and seller (with an intermediary sometimes involved) simply negotiate a price between each other.

In essence, two individuals could end up purchasing stocks of the same company on the very same day at a significantly different price depending on the negotiation, the desperation of the seller to get out or the urgency of the buyer to enter the deal. The factors that influence the price are the valuation of the company during its last round of funding, rumors of its planned initial public offering, investor appetite and scarcity of available stock, among others.

How does the Transfer Occur Practically?

Although these unlisted shares are not traded in any exchange market, they are kept in demat accounts, similar to the ones maintained by listed shares in depositories such as NSDL/CDSL.

Following is the simple transfer process:

Buyer and seller (through their broker) decide on the cost of the transaction and the number of shares to be traded.

The Share Purchase Agreement (SPA) is signed, which outlines the agreement between the parties.

Instructing their Depository Participant (DP) through Delivery Instruction Slip (DIS) or online facility, the seller requests to transfer the shares.

This transfer occurs directly from the seller’s demat account to that of the buyer. The off-market transfer happens when the transfer occurs outside of the exchange settlement system.

Once confirmed by the depository, the shares get credited to the buyer.

Conclusion

Indeed, trading in unlisted shares gives one an opportunity to invest in the exciting world of promising private companies at the early stages – but it comes with a completely different risk level compared to conventional stock market investments. With lower liquidity, reduced information flow, and pricing done through negotiations rather than on the market, investing in unlisted shares requires patience and thorough research much more than promptness and decisiveness.