New Delhi, Oct. 31 -- Every investor wants to spot the next multibagger early. Small caps give that chance, but they can also bring sharp price swings and the risk of overpaying for a good story. In a year where benchmark indices have delivered negative returns, even as small and mid caps have supported the market, Ajay Khandelwal, Head of Equities at Motilal Oswal AMC, spoke about how his team selects small-cap stocks, what it avoids and how individual investors can approach the segment.

Many investors still look at small caps as they were years ago, which is 'small' and very volatile. Khandelwal said that view is outdated. The largest small cap now has a market value of about Rs.35,000 crore, and more than 1,200 stocks are available ab...