High Beta Stocks: Investors have paid off on this Bet

Top 100 stocks gain 32% More than Sensex in Last 30 days.

Around 1100 stocks with higher beta than 1, have given an average 20% more gains than Sensex. Conversely, around the same number of stocks have given an average 30-day return similar to Sensex.

What is Beta?

Beta is a statistical ratio. A Beta of greater than 1 indicates that the stocks’ price will be more volatile than the market. Beta less than 1 means the stock is less volatile and Beta = 1 means the stock is the mirror image of the Sensex. Say for example, Index Mutual funds have Beta of 1 because the portfolio of Index mutual funds is the mirror image of the Index.

Say for Example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market which means if market goes up 100%, the stock will go up 120% and vise versa means if market gives minus 100% return than this stock will give you negative 120 % return.

Following stocks have given over 50% excess returns than Sensex in last 30 trading sessions.

- India Infoline –Beta – 2

- Orbit Corporation – 1.93

- Unitech – 1.86

- IFCI – 1.71

- Everonn Systems – 1.69

- Hindustan Construction – 1.66

- Aptech – 1.62

Investors should stick to high-beta stocks with good fundamentals. With the outlook of equity markets changing and inflows turning positive, high beta stocks will continue to outperform.

Low-beta stocks which act as great capital protectors during a market downturn do not participate when the market starts up moving up.

Usually defensive sectors such as FMCG & Pharma have low beta values and hence it is no surprise to see following stocks giving even negative returns in the same 30 days period.

- Nestle – 0.32

- Elder Health – 0.36

- Asian Paints – 0.38

- Godrej Consumer – 0.40

- Hero Honda – 0.47

- Dr. Reddy’s – 0.51