If you are looking to invest in Ramsarup Industries Limited’s (NSEI:RAMSARUP), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures RAMSARUP’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is considered more sensitive to market-wide shocks compared to a stock that trades below the value of one.
Check out our latest analysis for Ramsarup Industries
An interpretation of RAMSARUP’s beta
Ramsarup Industries’s beta of 0.3 indicates that the stock value will be less variable compared to the whole stock market. This means that the change in RAMSARUP’s value, whether it goes up or down, will be of a smaller degree than the change in value of the entire stock market index. RAMSARUP’s beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns.
How does RAMSARUP’s size and industry impact its risk?
With a market cap of INR ₹70.16M, RAMSARUP falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Furthermore, the company operates in the electrical equipment industry, which has been found to have high sensitivity to market-wide shocks. Therefore, investors may expect high beta associated with small companies, as well as those operating in the electrical equipment industry, relative to those more well-established firms in a more defensive industry. It seems as though there is an inconsistency in risks portrayed by RAMSARUP’s size and industry relative to its actual beta value. A potential driver of this variance can be a fundamental factor, which we will take a look at next.
Can RAMSARUP’s asset-composition point to a higher beta?
An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I test RAMSARUP’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, RAMSARUP appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. Thus, we can expect RAMSARUP to be more volatile in the face of market movements, relative to its peers of similar size but with a lower proportion of fixed assets on their books. However, this is the opposite to what RAMSARUP’s actual beta value suggests, which is lower stock volatility relative to the market.