1. What is Beta in Stock Market?

Beta measures a stock's volatility relative to the overall market (usually Sensex/Nifty in India). A beta of 1 means the stock moves with the market, less than 1 means less volatile, and greater than 1 means more volatile than the market.

2. How Beta is Calculated

The calculator uses the standard beta formula:

Where:

• Covariance — Measures how stock returns move with market returns
• Variance — Measures how market returns deviate from their average

Explanation: Beta essentially compares the stock's responsiveness to market movements.

3. Importance of Beta in Indian Market

Details: In Indian markets, beta helps investors understand risk relative to Sensex/Nifty. High beta stocks (like many small-caps) offer higher potential returns but with greater risk, while low beta stocks (like FMCG) are more stable.

4. Using the Calculator

Tips: Enter the covariance between stock and market returns, and the variance of market returns. Both values can be calculated from historical return data.

5. Frequently Asked Questions (FAQ)

Q1: What's considered high/low beta in India?
A: Typically: β < 0.8 (low), 0.8 ≤ β ≤ 1.2 (market), β > 1.2 (high). But sector norms vary.

Q2: How many data points needed for accurate beta?
A: At least 30-50 trading days, but 1-3 years of weekly data is more reliable.

Q3: Does beta change over time?
A: Yes, as company fundamentals and market conditions change.

Q4: Which is better - high or low beta?
A: Depends on strategy. High beta for aggressive growth, low beta for capital preservation.

Q5: Where to find beta values for Indian stocks?
A: Financial websites like Moneycontrol, Screener.in, or broker research reports.