17 HIGH BETA INDIAN STOCKS
1. INTRODUCTION:
Systematic risk or market risk uncertainty inherent to the entire market which consists of day to day volatility fluctuation in stock price. Unsystematic risk or specific risk that comes from industry or company which investor invest in. Unsystematic risk can be reduced through diversification. Beta is measure of volatility/systematic risk, of security or a portfolio in comparison to market as a whole. Beta gives stock market risk compare to the greater market. Beta is one of the factors investor should look at before picking stocks. High beta stocks are fundamentally strong and have positive growth triggers can be good stocks to hold for current level by avoiding news and speculation gives more return over a period of time. Beta shows the relationship between the movement of stock and the overall market. A beta higher than one means the stock rises more than the market in bullish condition (anticipation of prices will go up) and slips more when markets are falling (bearish on market). As per major market analyst, stock market touching new high supported by external liquidity, corporate earnings growth is likely to accelerate.
2. MAJOR FACTORS WHILE SELECTING HIGH BETA STOCKS:
Ø Whether overall market condition is downside for broader market or the sector is limited or not: the market downside will impact the value of the stock or return of the stock. If the overall market condition is bearish, investment value will be coming down.
Ø Whether upside is significant or not: only measuring the beta for short period is not enough to build portfolio. Investor has to see how significant the bullish market over a long period of time, considering overall market conditions.
Ø Sector chosen should have a record of running parallel to the market: prefer large cap companies with established track record of financial growth, robust financial statement and strong management. Similarly prefer medium companies anticipating higher earnings growth. Selecting the sector place major role, as it significantly affect the value of portfolio.
Ø Investor should use other parameters such as return on equity, growth rate, debt level, order books and profit margin before selecting pools of stocks.
3. POTENTIAL HIGH BETA STOCKS:
It is most important that the selection of stocks will have major impact on portfolio return and the performance is dependent on various other parameters. Generally beta of the market is one. If the stock beta is more than one will be considered as higher risk as well as potential to earn higher return. By considering individual stocks and S&P BSE 500, 17 stocks examples have been chosen which gives highest return over 1 year period.
Table 3.1: Table showing the high stock beta, last 1 year beta and 1 year return.
Inference: based on above it can infer that the beta of individual stock against S&P BSE 500 is more than one in all the companies except Rajesh exports Ltd. Stands at 0.96 near to 1 given the return of 108.32%. Investor has to consider not only beta into consideration for expectation of higher return. Although beta value of India bulls real estate Ltd. Is 2.3851 which is highest among 17 stocks given return of 112.20 compare to Spice jet Ltd. Which has given highest return of 245.82%, spice jet other parameters are very strong, hence it has given highest return. Another example of Balaram chini Mills has beta of 1.07 given a return of 184.30% considering other parameters.
4. CONCLUSION:
High beta stocks can be used as a screening measure for stock selection. Investor has to consider overall market condition, significance, past record of stocks running parallel. It is not sufficient to consider high beta value stocks, investor has to consider other parameters such as return on equity, debt level growth rate, profit margin and order books while selecting stocks.
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