10 High Beta Stocks That Could Rally Even More When Indices Gain

These stocks can give you significantly higher returns when the markets rally and similarly could erode your portfolio even more when the market declines. Nifty High Beta Index is an index that aims to measure the performance of stocks that are part of NSE, that show high volatility than the Nifty. The index consists of 50 stocks.

Here is a list of top ten Beta stocks that are part of the Nifty High Beta index.

Company Name	Proportional weight in index (%)	Current market price (Rs/share)	Freeflow market cap (Rs lakh)
Tata Motors Ltd	2.72	444.40	79,96,305.15
IDFC Ltd	2.68	91.05	12,05,236.45
RBL Bank Ltd	2.59	168.95	10,04,555.91
L&T Finance Holdings Ltd.	2.41	95.00	7,06,989.39
Canara Bank	2.38	293.50	19,72,739.66
Steel Authority of India Ltd.	2.37	84.40	12,22,325.70
Godrej Properties Ltd.	2.34	1,211.30	13,77,837.14
IDFC First Bank Ltd.	2.29	58.20	17,74,717.85
DLF Ltd	2.26	361.30	22,37,065.96
Poonawalla Fincorp Ltd.	2.19	301.10	8,97,725.58

(Source:https://www.niftyindices.com/indices/equity/strategy-indices/nifty-high-beta-50; NSE)

What is high beta stock?

Beta is a measure of relative volatility of a stock or an investment portfolio with respect to the overall market, which points to the riskiness. In other words, it focuses at capturing how much higher than the market a stock's price can surge when the market moves higher and how much more the stock price can plunge below when markets fall. Higher the beta of a stock, the more its price will surge when markets rally - and the steeper it will fall during the corrections. The correlation of stock's price movement with the index is tracked and by default its value is 1.

If a stock's Beta value is above 1, it means that the stock is extremely volatile and can give high returns. If the Beta value is less than 1, it would indicate that the stock is less volatile than the market and will provide less return. If by chance a stock Beta value is 1, it shows that the price of the stock moves in line with index. In this case the index is Nifty.

Therefore the simple thing to remember when you buy and sell high beta stocks is that they are volatile. This means, if you do not have an appetite for risk, do, not buy into them.

Methodology of Nifty High Beta index.

As mentioned Nifty High Beta 50 Index is a well diversified index of 50 stocks. In order to make the 50 stock index, company turnover, market capitalisation are few criteria used for selection. The weight of each stock assigned to this index is as per the Beta value of that stock. Stock of company having the highest beta gets the highest weight. To calculate Beta 1-year trailing prices are used (adjusted for corporate actions). Then the stocks are ranked in descending order of beta values. Top 50 companies based on beta rankings form part of the index. In order to reduce the replacements of scrips in the index, a buffer of 100% will be applied at the time of each review.

Disclaimer

This article is for information purposes only and is not a recommendation to buy, sell or hold. Greynium Information Technologies and the Author, are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.