By Ronojoy Mazumdar and Ishika Mookerjee

Companies with high levels of debt are the latest beneficiaries of a retail investor-fueled rally in Indian stocks that’s defying the worst economic outlook in four decades.

A custom Bloomberg index of the 30 most leveraged stocks out of India’s top 200 companies has gained 32% since the end of March, compared with a 28% advance in the benchmark S&P BSE Sensex. A basket of the 30 least leveraged companies — similarly compiled using debt-to-asset ratios and excluding lenders — has gained just 18%. That’s a big change from earlier in the year, when pandemic fears put a premium on companies with strong balance sheets and low net debt.

“The re-emergence of unsophisticated retail traders is at least in some part responsible

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