The Indian stock market has been highly volatile over the past month, with the Nifty 50 slipping approximately 1% while struggling to stay above the 25,000 mark. This was mainly due to the geopolitical tensions in the Middle East, uncertainty around US interest rate cuts and expensive valuations. Additionally, the recent stimulus measures in China have drawn global investor attention, leading to a shift in focus from Indian equities to Chinese markets, further contributing to the pressure on Indian stocks.
Many high-beta stocks, known for their greater volatility, saw negative returns over the past month. Beta is a measure of a stock's volatility in relation to a benchmark index like the Nifty50 or the BSE Sensex. A beta of 1 means the stock moves with the market, while a beta higher than 1 indicates greater volatility, implying higher risk. Stocks with a beta lower than 1 are less volatile than the market. High beta stocks can be good investments for traders who don’t mind risk and a little bit of worry with their breakfast, since these can deliver higher returns.
In this edition of Chart of the Week, we analyze the top eight companies with the highest beta within the Nifty500 universe, over the past month and past year. These stocks have been impacted by a variety of factors, ranging from market expansion to financial performance.
Kaynes Technology leads high-beta stocks with 20% monthly gains
Kaynes Technology has the highest beta value of 2.8 over the past month and 1.4 over the past year with its stock posting 20% gains in the past month. The major reason behind this is that the company is expanding into new markets, including automotive, industrial, and medical electronics. Kaynes recently opened a manufacturing facility in Hyderabad to enhance its global competitiveness. Additionally, the company secured approval to build an Outsourced Semiconductor Assembly and Test (OSAT) facility in Sanand, Gujarat, which will produce 6.3 million chips per day for various applications. On a YoY basis, Kaynes has posted impressive gains of 110.9%.
The next highest beta stock is engineering consultancy company, Engineers India Ltd. with a beta value of 2.5 over the past month and 2 over the past year. The stock has fallen almost 3% over the past month. The share price of the company has been falling after it posted weak results in Q1FY25 with falling net profit on YoY and QoQ basis on August 9, 2024. On a YoY basis, Engineers India has posted gains of 44.8% with the beta value of 2.
HFCL, a leading player in the telecommunication equipment industry, also makes the list, posting 9.1% losses over the past month with the beta value of 2.4. Despite this, the stock is still performing well over the past year, posting gains of over 93% with the one year beta value of 2.
Construction stocks see short-term decline, but long-term growth looks strong
Construction and engineering companies Sterling and Wilson Renewable Energy and Rites Ltd. have also witnessed volatility in the past month with beta values at 2.2 and 2.3, respectively. Both companies have seen a fall in their share price over the past month. However, one-year returns of these companies have increased by a significant amount.
Housing and Urban Development Corp (HUDCO), a housing finance company, has also been very volatile in the past month with the one month beta value of 2.3 and one year beta value of nearly 2. Weak Q1FY25 results with a 27.4% fall in net profit has caused the share price to fall. However, the stock has performed well over the past year, posting gains of over 158%.
Electric utilities company Inox Wind has been one of the top performers among high-beta stocks, delivering remarkable gains of 321.6% over the past year with the beta value of the stock being nearly 1.5. However, in the past month, the stock has experienced notable volatility, with a beta value rising to 2.2, and its price declined by 6.2%. This drop followed a significant block trade in which approximately 2.75 crore shares, or 5% of the company's total equity, were traded on the exchanges. The trade occurred as Inox Wind's promoter, Inox Wind Energy Ltd. (IWEL), planned to sell up to 5% of the company's equity in a block deal.
In summary, while these stocks have high-risk profiles, they also offer the potential for significant returns, attracting investors willing to brave the volatility. High-beta stocks remain a popular choice for traders seeking opportunities to capitalize on short-term price fluctuations in a volatile market. This data reveals that while some high-beta stocks have managed to outperform, others have succumbed to the market’s turbulence, underscoring the dual nature of high-risk investments.
