17
HIGH BETA INDIAN STOCKS
HIGH BETA INDIAN STOCKS
1.
INTRODUCTION:
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.
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:
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.
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.
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.
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.
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:
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.
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.
stock beta, last 1 year beta and 1 year return.
Sources: Economic Times
article, 16th June 2016.
article, 16th June 2016.
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.
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.
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.
<www.economictimes.com>
<www.businesstoday.com>
<www.bseindia.com>
