Worst stocks become the best

The recent stock market rally which has delivered close to 20% returns in just one month, has surprised many market watchers. A quick look into the stock returns reveals that laggards over the past year delivering best returns.According to BSE 500 data, which constitutes 90% of the market capitalisation on Indian bourses, the best returns came from those stocks which lost heavily in the preceding 365 days.

Dividing all the stocks in the BSE-500 in groups of fifty, showed that the top 50 stocks delivered 52% gains (on an average ) in the last 30 days and also boasted of 57% losses in the last 365 days — the worst returns.

ET reports:a stock like Financial Technologies, part of the top 50 group, definitely gained 61% in just 30 days but has incurred 58% loss in the last one-year period. This analysis not only holds true for the top 50 stocks but progressively for the next 400 stocks: As the average 30-day gains reduce, so do the average 365-day losses.

The second 50 stocks recorded 36% gains in the 30-day period but also clocked 56% losses in the one-year period .This continues for third, fourth, fifth and sixth fifty stocks.

One needs to bear in mind that India's bear markets have historically lasted 30 months on average and longer than India's bull markets. The market is more likely to crawl rather than spike out of its current trading band that is getting a bit wide," said the head of equity of a foreign brokerage.