Low-priced vs high-priced stocks: Which delivered better returns?

Retail participation has increased in the last year or so, amid an increase in retail participation. It is important to check whether the ‘low-priced’ stocks have delivered better returns or is it the ‘high-priced’ stocks, which have been dominant. 

The benchmark indices logged a new all-time high recently. This reminds us of a verse from the poem, ‘Still I rise’, by Maya Angelou, which is: “Leaving behind nights of terror & fear, I rise, into a daybreak that’s wondrously clear, I rise, bringing the gifts that my ancestors gave, I am the dream and the hope of the slave, I rise, I rise, I rise.”   

The above verse is very apt for the stock market as the markets left behind the nights of terror & fear, which were triggered by the pandemic outbreak and if this was not enough, it even climbed the wall of worry of the second wave of Coronavirus that was severe than the first wave.  

Nifty went up by nearly 13.5 per cent on a YTD basis. What is more exciting is that the latest bullish spell in the market has benefited the entire market, which is quite contrary to the previous occasions, where the rally was driven by selected blue chips. The testimony of this is that the broader markets have outperformed the frontline indices. As on a YTD basis, Nifty Midcap 100 and Nifty Smallcap 100 soared 29 per cent and 37 per cent, respectively.   

One of the key drivers for this stupendous rally in the market is liquidity. Liquidity flow from FIIs and also, from the retail investors have been one of the key driving forces for the markets. Retail participation has increased in the last year or so, amid an increase in retail participation. It is important to check whether the ‘low-priced’ stocks have delivered better returns or is it the ‘high-priced’ stocks, which have been dominant. 

First of all, let us see what low-priced stocks and high-priced stocks are. Low-priced stocks are the stocks that trade below Rs 100 while high-priced stocks trade in four digits. It’s important to understand that we are taking the current market price as a parameter to define the low-priced and high-priced stocks; we are not using any valuation parameter to define it.   

Why it is important to see whether the low-priced or high-priced stocks have been dominant is because there is a perception that retail investors are more inclined towards buying low-priced stocks. So, let us see who the winner has been so far in the calendar year (CY) 2021.   

There are as many as 246 low-priced stocks, which have managed to deliver positive returns in CY 2021. Meanwhile, there are 212 high-priced stocks that have delivered positive returns. The important point to note here is that we have taken into consideration low-priced stocks, which have seen volumes of 2.5 lakh in the last trading session. While in the high-priced stocks, we have used a filter of trades greater than 100.   

So, the above data is more inclined towards low-priced stocks. Further, we checked how many multi-bagger stocks were seen in both categories from the beginning of CY 2021. Yet again, low-priced stocks emerged as a stand-out winner as there as many as 47 stocks, which have delivered gains of more than 100 per cent on a YTD basis, while there are only 22 stocks from the high-priced category that have turned out to be multi-bagger this year, so far.   

In the low-priced stocks, Diligent Media Corporation is in the top gainers' list as it has jumped 636 per cent on a YTD basis, followed by Majesco & RattanIndia Enterprises as they rose by 514 per cent and 467 per cent, respectively. Among the high-priced stocks, the top gainer has been Orchid Pharma as it gave staggering returns of over 750 per cent, followed by Tips Industries & Saregama India, which have surged 291 per cent and 237 per cent, respectively.   

Love it or hate it but you cannot ignore the ‘low-priced’ stocks. However, one should remember that low-priced stocks are not for faint-hearted people as they are quite volatile in nature. Furthermore, due diligence is always required before entering any stock, whether its price is low or high.