High-beta stocks may outperform
That is because, the irrationality of excessive exuberance or pessimism tends to escalate or deflate the asset value than the fundamental strength of the stock would necessitate. Therefore, if an investor is not price-conscious, he/she may end up investing in an over-priced asset. Off course, buying an undervalued asset is ideal, but the prevalent sentiment tends to deter most retail investors from availing such opportunities. Thus, from a retail investor point of view, this value-consciousness is necessary. That is because; most of the investing periods tend to overlap in a largely sideways market.
Now, to appreciate the investment rationale in the current setup, the primary question to ask is; what does the environment suggest, to whom would it be beneficial (now or later), and is the price right? We know that our economy has moderated significantly since the heady 8% plus growth days. The latest growth estimates are in the 5.3% range. The IMF is putting its growth forecast for Indian economy at around 5.9% for CY2013.
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