Speculative stocks lead to phenomenal returns

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Speculative stocks lead to phenomenal returns
Dena Bank: Quotes, News
BSE 38.10BSE Quote0.5 (1.31%)
NSE 38.15NSE Quote0.4 (1.05%)
The buoyancy being witnessed in the last couple of months, is leading to speculation that is reminiscent of the pre-Lehman era, when stocks from the real estate sector could offer single day gains of 5 to 10%.

Leading the pack this time are select stocks from infrastructure and banks, which are slowly turning to be speculators delight, as these are high beta stocks and are offering 5 to 11% returns on a slightly volatile trading day.

In a single day on Feb 28, Reliance Infrastructure shot-up 11%, without being driven by any news. Jaiprakash Associates, Reliance Communications and the small and mid-sized public sector banks rallied 5 to 10% on the same day. Pertinently, the Sensex climbed only 1.67%. This trend is not typical of a single day, but has been consistent in the last two months. In fact, whenever the market has gained, these stocks have gained at a frantic pace, outperforming the Sensex by a big margin.

Interestingly, these stocks have not been investment bets, but more speculative bets, as can be gauged from the low delivery in these stocks. For example, the per cent of deliverable quantity to traded quantity was just 19.54 % for Reliance Power and 13.30% for Reliance Infrastructure on Feb 28 on the National Stock Exchange.

Quotes for 27th and 28th Feb

                                            Closing on Feb 27       Closing on Feb 28     Gains (%)

Reliance Infra                        540.80                        602.75                      11.36
Dena Bank                                79.65                          87.00                        9.23
Jaiprakash Associates             69.95                          74.90                       7.08
United Bank                              69.00                         74.50                        8.00
Reliance Communications       87.90                         94.25                        7.34

Marketmen are of the opinion that nothing has changed fundamentally for these stocks, except market buoyancy which has helped them become a speculators delight. Interestingly, when the markets fall these stocks fall even sharper then the markets, which makes them high beta stocks.

As buoyancy continues these stocks are expected to continue to remain in the limelight, offering returns in a single day that are sometimes higher than one year bank fixed deposits.


Read more about: infrastructure, sensex, nse
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