Top High Beta Stocks – Meaning, Advantages, Benefits & How to Invest in them?
High beta stocks are a popular investment option among traders who seek higher returns. These stocks are known for their volatility and are perceived as high-risk, high-reward investments.
In this blog, we will explore the meaning of high beta stocks, who can potentially invest in them, benefits, factors to consider before investing, and a list of top high beta shares.
What are High Beta Stocks?
High Beta stocks meaning are those shares that have a beta coefficient greater than 1, indicating that they are more volatile than the broader market. These stocks tend to experience larger price movements in either direction compared to the market, making them high-risk, high-reward investments.
Top 10 High Beta Stocks in NSE
Here is the list of high beta stocks in Nifty50 along with stock beta value, share price and market capitalization.
| Stock Name | Sub-Sector | Market Cap (in Cr) | Share Price |
|---|---|---|---|
| Indusind Bank Ltd | Private Banks | ₹1,07,014.32 | ₹1,416.55 |
| Bajaj Finserv Ltd | Insurance | ₹ 2,36,850.41 | ₹1,514.5 |
| Bajaj Finance Ltd | Consumer Finance | ₹4,33,456.19 | ₹7,320.6 |
| Tata Motors Ltd | Four Wheelers | ₹2,19,958.58 | ₹611.2 |
| Hindalco Industries Ltd | Metals - Aluminium | ₹1,02,960.75 | ₹473.25 |
| Axis Bank Ltd | Private Banks | ₹2,99,925.74 | ₹991.15 |
| Adani Enterprises Ltd | Commodities Trading | ₹2,75,794.77 | ₹2,450.05 |
| Tata Steel Ltd | Iron & Steel | ₹1,50,202.69 | ₹127.05 |
| State Bank of India | Public Banks | ₹5,00,983.09 | ₹569.55 |
| Mahindra and Mahindra Ltd | Four Wheelers | ₹1,88,588.60 | ₹1,591.95 |
Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data is from 31st August, 2023. However, for real-time updates on stock prices and market trends, visit smallcase stocks collection today!
How is Beta Calculated in High Beta Stocks NSE?
Beta value is a measure of a stock’s volatility, and it is calculated by comparing the returns of a stock to the returns of the broader market. The beta of the broader market is defined as 1, and a stock with a beta greater than 1 is considered to be more volatile than the market, while a stock with a beta less than 1 is considered to be less volatile than the market.
To calculate the higher beta of a stock, analysts typically use regression analysis to compare the returns of the stock to the returns of a relevant market index, such as the S&P 500. Regression analysis involves calculating the slope of a line that represents the relationship between the stock beta returns and the returns of the market index. The slope of this line is the beta coefficient.
How is Beta Calculated in High Beta Stocks?
Beta is a measure of a stock’s volatility, and it is calculated by comparing the returns of a stock to the returns of the broader market. The beta of the broader market is defined as 1, and a stock with a beta greater than 1 is considered to be more volatile than the market, while a stock with a beta less than 1 is considered to be less volatile than the market.
To calculate the beta of a stock, analysts typically use regression analysis to compare the returns of the stock to the returns of a relevant market index, such as the S&P 500 (Stock Market Indices). Regression analysis involves calculating the slope of a line that represents the relationship between the stock’s returns and the returns of the market index. The slope of this line is the beta coefficient.
High Beta Stocks in NSE – Overview
Let’s have a look at the high beta stock in NSE that tops the list.
Indusind Bank Ltd
IndusInd Bank is a prominent Indian financial institution known for its wide range of banking and financial services, serving both retail and corporate customers.
- Moderate Risk: Stock is 2.56x as volatile as Nifty
- Largecap: With a market cap of ₹1,07,014 cr, stock is ranked 53
Bajaj Finserv Ltd
A diversified financial services company in India, offering insurance, lending, and wealth management solutions, known for its customer-centric approach.
- Moderate Risk: Stock is 2.22x as volatile as Nifty
- Largecap: With a market cap of ₹2,36,850 cr, stock is ranked 23
Bajaj Finance Ltd
It is a leading non-banking financial company (NBFC) in India, specializing in consumer and small business lending, with a strong presence in the retail finance sector.
- Moderate Risk: Stock is 2.24x as volatile as Nifty
- Largecap: With a market cap of ₹4,33,456 cr, stock is ranked 10
What is the Importance of Beta in Stock Valuation?
Beta is an important factor in stock valuation because it helps investors to determine the riskiness of a stock compared to the broader market. A stock’s beta is an indication of how much its price is likely to move in relation to the share market, and this can help investors to assess the potential risks and rewards associated with an investment in that stock.
For example, if a stock has a beta of 1.5, it is considered to be 50% more volatile than the broader market. This means that if the market moves up by 10%, the stock is likely to move up by 15%, and if the market moves down by 10%, the stock is likely to move down by 15%. On the other hand, if a stock has a beta of 0.5, it is considered to be 50% less volatile than the market, meaning that its price is likely to move up or down by only half as much as the market.
How to Invest in High Beta Stocks NSE?
You can invest in high beta stocks NSE through several avenues. This includes buying individual stocks through a stockbroker, investing in high beta ETFs or mutual funds for diversification, using derivatives like futures and options for more advanced strategies, or setting up systematic investment plans (SIPs) for disciplined investing. However, always research thoroughly and assess your risk tolerance when considering high beta investments.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
Beta BlockBuster smallcase
If you’re looking for a smart way to invest in the Indian stock market, you can check out ‘Beta BlockBuster.’ It’s a smallcase filled with high-quality beta stocks. These stocks have the potential to deliver attractive returns, and they’re known for their stability. However, investors must consider the investment goals and risk appetites before investing in High beta stocks.
Disclosures for Beta BlockBuster smallcase
Who Should Invest in High Beta Stocks?
Investing in high-beta shares can be suitable for investors who are willing to take on higher risks in exchange for potentially higher returns. Such investors may have a higher risk tolerance and a longer investment horizon, and they may be comfortable with the volatility that comes with investing in high-beta shares.
Moreover, investors who are interested in investing in growth industries may also consider high beta shares, as these stocks often provide exposure to sectors that are expected to experience strong growth in the future.
However, it is important to note that investing in these stocks comes with higher risks. Market conditions, such as interest rates, inflation, and geopolitical events, can have a significant impact on high beta shares. Hence, it is important to evaluate the trends in the industry, the financial performance of the company, and risk tolerance before investing in these stocks.
Factors to Consider When Investing in High Beta Shares
Investing in high beta stocks in Nifty 50 can be a lucrative strategy. However, it’s important to consider several factors before investing in these Nifty 50 high beta stocks. Here are five key factors to consider:
Industry Trends
One of the most important factors to consider before investing in high beta shares is industry trends. Investors should conduct thorough research to understand the current and future outlook for the industry in which the company operates. Investing in high beta stocks in an industry that is expected to grow rapidly in the future may provide better returns.
Company Performance
The performance of the company itself is also a critical factor to consider. Investors should evaluate the financial statements (such as balance sheets), revenue growth, profit margins, and other relevant metrics to determine whether the company is a good investment opportunity. Companies with strong fundamentals and positive earnings growth may be more attractive investment opportunities.
Market Conditions
Market conditions can have a significant impact on high beta stocks. Factors such as interest rates, inflation, and geopolitical events can affect the overall market, which in turn can impact the performance of these stocks. Therefore, it’s important to consider market conditions and how they may affect the performance of high beta shares before making an investment.
Risk Tolerance
Investing in high-beta stocks requires a higher risk tolerance than investing in low beta stocks. These stocks are more volatile and can experience significant price fluctuations in a short period of time. Therefore, investors should consider their risk tolerance before investing in these stocks.
Valuation
Finally, investors should consider the valuation of high-beta stocks before investing. These best beta stocks may be overvalued or undervalued, and investors should evaluate the stock’s price-to-earnings ratio (P/E ratio), price-to-book ratio (P/B ratio), and other relevant metrics to determine whether the stock is a good investment opportunity.
Benefits of Investing in High Beta Stocks
Investing in high beta stocks in Nifty 50 can offer several benefits, including:
- Higher Returns: High beta shares often provide the potential for higher returns than the overall market. It is because they are more volatile and can experience significant price fluctuations in a short period of time.
- Diversification: High beta stocks can help diversify a portfolio, as they often come from different industries and sectors than low or negative beta stocks. By investing in high beta stocks, investors can reduce the overall risk of your portfolio by spreading investments across different types of stocks.
- Exposure to Growth Industries: High beta shares are often found in growth industries such as IT, healthcare, and biotech. Investing in these industries can provide exposure to innovative companies that are expected to experience strong growth in the future.
- Potential for Capital Appreciation: High beta shares can offer potential for capital appreciation, as they have the potential to increase in value rapidly.
As always, investors are advised to do their own research or consult their financial advisors before investing in high beta stocks.
What are High Alpha and Low Beta Stocks?
High alpha low beta stocks refer to stocks that exhibit high returns relative to their risk, as measured by their beta coefficient. These stocks are generally considered to be less volatile than the broader market, as their beta coefficient is below 1. However, they also offer higher returns than the market, as measured by their alpha coefficient.
To Wrap It Up…
High beta stocks offer the potential for higher returns but come with higher risks. Therefore, carefully evaluate your investment goals and risk tolerance before investing. Consider the factors that we have mentioned in this blog to make informed investment decisions.
Moreover, you can invest in high-beta stocks via modern instrument products like smallcase. It offers a platform to invest in a range of high-beta stocks in a diversified portfolio.
So, what are you waiting for? Begin your investment journey today by downloading the smallcase mobile app.
FAQs
According to recent updates, the best high beta stocks in India to invest in include Indusind Bank Ltd, Bajaj finserv Ltd, & Bajaj Finance Ltd.
Note: This list for educational purpose only and not recommendatory.
You can invest in the best high beta stocks in Nifty in India by:
1. Do your research
2. Diversify your portfolio. Don’t put all your eggs in one basket.
3. Invest for the long term. High beta stocks can be volatile in the short term, but they tend to do well over the long term.
4. Monitor your investments
Yes, high beta stocks can be good for intraday trading. High beta stocks, being more volatile than low beta counterparts, exhibit greater price fluctuations over short time frames, making them suitable for intraday trading.
However, investors must do their own research and/or consult their financial advisor before investing.
The ideal beta for a stock depends on your investment objectives and risk tolerance. Generally, a beta of 1 indicates the stock moves in line with the overall market. A beta greater than 1 suggests higher volatility.
Yes, high beta stocks can be profitable for investors. High beta stocks are more volatile than low beta stocks, which means that their prices tend to move up and down more than the prices of low beta stocks. At the same time investors should always consider the market risks before investing.
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