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Dr. Pradeep Kumar Mitra

In the last one year the stock market has witnessed a huge downward swing where the bench mark index (NIFTY 50) has provided a negative return of almost 4.2%. The carnage in the Midcap index (-21.70%) and Small cap index (-28.70%) returns is now too heavy for the common investors who joined the zeal of market in the financial year 2017-18 and continued to pour funds in the market. The common investors are generally risk averse but they get many times carried away with the bullish fever in the market and ultimately repent on it. Risk aversion means that investors naturally try to avoid risky investments and when they are put into a risky situation they demand for more return. As such equity investment is a high risk instrument but the risk can be lowered if an investor invests in low volatility stocks. A low volatile stock means fewer fluctuations in its daily charts and normally has lower beta which is close to 1 or less. So pertinent question is whether investing in low volatile stocks can save investors from these swings and give a better sleep in the night with a handsome equity exposure in their portfolio. The portfolio at the same time should provide a better risk adjusted return that outperforms the index return.