Beta- Analyzing mutual funds

Guru Prasad -
 The risk of any investment made always depends on the volatility in the following investment. If we can have a factor that could tell us about the volatility of a investment and help us judge our risk and corelate it with our capability to take risk, how would that be? Well Beta factor is one such factor that could help us know the sensitivity of our stock or portfolio fund that we have chosen to invest. Beta ratio:- Understanding Beta:-  Beta is a metric used in fundamental analysis to determine the volatility of a stock with comparison to the overall market that has a fixed beta ratio of 1 always. Stocks or funds that are ranked with a beta ratio above 1 generally tend to fluctuate more and hence give access to more risk but yielding higher returns too at the same time if gone in favour. While the risk is slightly less in the funds with beta ratio below 1 they give less but yet stable return on investments generally. Hence, the beta factor can be said as a risk- reward factor, helpi
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Are markets over rallying?

Guru Prasad -

 The sensex has touched 59k and nifty has had a strong rally giving a touch to the 17,700 mark. While the nation is leading towards a fast economic recovery there are also certain concerns over a third wave of covid that lies, but yet the bull run has seemed to have no impact. While the reformations in the telcom sector to help revive vodafone idea has been a positive news for the telcom sector there are also reformary steps being taken by the government along side. The GST collections are touching new highs being a good symbol for an economy recovery. Hence, the foreign portfolio investments also seem to be flowing well into the country. While running corrections could take place in market now there does not seem any reason for a drastic fall in the market until effected by another wave of covid. But, yes the markets are growing at a pace more than expected and hence it could be the right time for partial profit bookings in some stocks. While the market still trades at a pe ratio which might not seem very high to many market traders, the markets have of course rallied more than normal. 

Economists say that while the market is positively linked to economic growth in long periods of 10-20 years, the same cannot be said for the short term. “While the market is always forward looking, in the short term it is driven by daily news flow, and the news around vaccination of 18 and above, shortage of vaccines, rise or fall in daily cases etc are currently driving market movement. Given the fact that in the next 3-4 years the economy is expected to go back to 7-8% GDP growth rates, one can only guess the levels at which the Sensex would trade at in three to four years,” said Madan Sabnavis, chief economist at Care Ratings. He added, however, that over the last one year there has been no linkage between the economy and the market movement.

And the above statements and views seem highly true at the present circumstances. Markets are always a volatile figure impacted even by the smallest news at times. Hence as I already said a partial profit booking for those who have taken poitions from long is a good option but entering and taking new position at this time is not suggestible (this may vary depending on some partcular) and I think the markets need to correct a lot so that the ground reality of the economy and markets can go hand in hand.

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