Stock Shastra

The Financial Year 2012 saw negative news continue to pour in for the market. Since the 19,000 level seen in March, Sensex has dropped more than 10% over the last two and a half months. The factors leading to this fall include inflation, rising interest rates and weak global cues. Inflation has been one of the key concerns for the Indian companies affecting earnings in the previous quarters. To tame the inflation, the RBI has continued tightening the monetary policy by rising interest rates.

So, how have the Sensex companies performed on the earnings side for the March quarter? And most importantly what action should you take considering the Sensex@MRP?

Investors look at several parameters like EPS, earning growth rate, ROIC, Debt-to-profit, P-E ratios and many more of a company to find a good buy. These parameters are no doubt will get us to the best companies available at a point of time. But there are some other important parameters which can enhance our return when looked properly. Stock’s Beta is one such parameter, which is easy to calculate and easy to apply while selecting stocks.
Volatility and Risk:
When we analyse stock prices, we can notice two types of volatility. The first type can be attributed to the company-related factors such as delay in projects, concern about growth potential, competition from within and outside the country, Industry structure and changes in the management and financing patterns. Risks generated due to these factors are usually industry-specific and called ‘unsystematic risk’. According to Portfolio theory the overall unsystematic risk can be reduced by [...]