Which are the top growth stocks in India right now?
As per Equitymaster's Stock Screener, these are the top growth stocks in India right now.
- #1 ZOMATO
- #2 ADANI GREEN ENERGY
- #3 L&T INFOTECH
- #4 INDUS TOWERS
- #5 TRENT
These companies have been ranked as per their 5-year sales compounded annual growth rate (CAGR)
High growth companies have the potential to generate multibagger returns. But if these companies disappoint even slightly, they could get punished heavily by the market due to high valuations.
However, there are other parameters you should take into account as well before forming a hard opinion on the stock.
What are growth stocks?
Growth stocks are companies whose sales and profits are growing at a faster pace than the market.
The top growth stocks usually trade at a premium to other stocks in the market because investors are willing to pay for the higher profits in the years ahead.
The faster they grow, the bigger the returns are for shareholders.
What are the risks of investing in growth stocks?
It's important to understand that growth stocks have a lot of investor expectations driving them higher. This is why they trade at high PE ratios. In fact, they are the most expensive stocks in the market.
If these expectations are dashed due to poor quarterly results or some unexpected event, then growth stocks will crash.
There's also the risk of higher interest rates. If interest rates rise, it puts breaks on growth stocks and their plans.
Investors who have a low risk-appetite may want to reconsider pursuing a growth-oriented investing strategy.
Which is better – value stocks or growth stocks?
There is no clear winner as both focus on different investing strategies. It is up to investors to identify their investing goals and choose accordingly.
Growth stocks are more volatile than value stocks but have the potential to rise in price substantially. On the other hand, value stocks are low-risk, and offer regular dividends but can't fulfill short-term investing goals.