Overview of the most volatile stocks in India
- IFCI Ltd
Established in 1948, IFCI Ltd—formerly the Industrial Finance Corporation of India—is a government-owned development finance institution. Operating under the Ministry of Finance, it plays a key role in funding industrial and infrastructure projects. IFCI is publicly listed on the National Stock Exchange (NSE).
- Vodafone Idea Ltd
Formed in 2018 through the merger of Vodafone India and Idea Cellular, Vodafone Idea Ltd is a prominent telecom provider in India. The company delivers a wide range of services including mobile voice, high-speed data, and enterprise solutions.
- Housing and Urban Development Corporation Ltd (HUDCO)
Founded in 1970, HUDCO is a government-owned financial institution focused on urban development. It provides loans for housing schemes targeting economically weaker sections and supports various urban infrastructure projects across India.
- Rail Vikas Nigam Ltd (RVNL)
Incorporated in 2003, RVNL functions under the Ministry of Railways. The company is responsible for implementing major rail infrastructure projects like new lines, doubling, gauge conversion, and electrification across the Indian Railways network.
- Mazagon Dock Shipbuilders Ltd
Established in 1934, Mazagon Dock Shipbuilders is a leading shipyard in India. It specialises in building warships and submarines for the Indian Navy, along with constructing offshore platforms and merchant vessels for commercial use.
Read more: Mid-cap stocks
Features of volatile stocks
Here are some key features of volatile stocks:
- Rapid price movements: Most volatile stocks see drastic price changes in real time, within a day or a few days.
- Volume and liquidity: Volatile stocks generally have high trading volumes and liquidity, enabling traders to enter and exit positions quickly.
- Risk and reward: Volatile stocks involve higher risk, which is accompanied by higher rewards. Investors in volatile stocks can either gain good returns or incur hefty losses.
- Market trend and sentiment: Volatile stocks are highly influenced by the current market trend (bullish or bearish) and market sentiment. Furthermore, affecting factors include news, earning reports, regulatory changes, etc.
- Indicators: Beta is one of the best measures to calculate a stock’s volatility against the overall market.
Interpreting beta
Numerous technical indicators are present when executing technical analysis for a specific stock. Beta is one indicator that provides information about how volatile a stock is compared to the overall stock market.
Here are the beta numbers and their meanings:
- Beta = 1: The stock is moving similarly to the market trend.
- Beta >1: The stock is more volatile than the overall market’s volatility.
- Beta <1: The stock is less volatile than the overall market’s volatility.
- Beta = 0: The stock’s price movement is unrelated to the market’s volatility.
- Negative beta: Although rare, this indicates that the stock has an inverse relationship with the market.
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How to find high-volatile stocks?
Most investors use beta as an ideal technical indicator to find volatile stocks in the stock market. When using beta, you can identify and analyse stocks with high volatility if their beta score exceeds 1.
Apart from beta, you can also use another technical indicator called standard deviation. Standard deviation is used to calculate the amount of variation or dispersion in a stock’s returns over a specific period. It shows how much the returns deviate from the average return (average mean price). The higher the standard deviation, the higher the stock’s volatility.
Another way to easily find high-volatile stocks is to track the Nifty High Beta 50, which invests in stocks with a beta score of more than 1. You can find the stock names, analyse them based on your research, and invest accordingly.
You can also check the daily volatility report published for the F&O segment to understand if the volatility is based on the underlying stock’s volatility. This way, you can find volatile stocks and invest for the price functions.
Read more: Large-cap stocks
Factors to keep in mind while investing in volatile stocks
Here are the factors you should keep in mind while investing in volatile stocks:
- Risk tolerance: Determine how much risk you can take and how much you are comfortable losing without a financial burden if volatility results in losses. Analyse stocks based on their risk exposure to understand how much volatility they should have.
- Investment horizon: Depending on your strategy, volatile stocks might be more suitable for short-term trading than long-term holding. Hence, if you want to invest for the short term to realise quick gains, you can consider investing in volatile stocks.
- Research and analysis: Most volatile stocks come with higher risk than other types of stocks. Hence, analyse the company’s financial health, including its revenue, earnings, debt levels, and growth prospects. Furthermore, understand the current market trend and execute sector-wise analysis to ensure you are investing at the right time.
- Diversification: It is never wise to put all your money in the single most volatile stock. If your strategy is to invest in volatile stocks for quick gains, ensure that you invest in multiple volatile stocks to spread the risk and limit your losses. Furthermore, balance your portfolio with a mix of high-risk volatile stocks and more stable investments.
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What are the advantages & disadvantages of the most fluctuating stocks?
Advantages
- Potential for High Returns: Highly volatile or high beta stocks in India may offer strong long-term gains, as they are often undervalued compared to more stable stocks.
- Trading Opportunities: Traders can leverage frequent price swings in high beta stocks on the NSE to generate profits from short-term trades.
- Exposure to Emerging Sectors: Investing in volatile stocks can provide early access to new and rapidly developing industries.
Disadvantages
- Increased Risk: High volatility or beta stocks carry greater risk, especially for intraday and options trading, due to dramatic price shifts.
- Market Uncertainty: Their unpredictable behaviour makes it difficult to time entries and exits effectively, affecting short-term gains.
- Lower Liquidity: These stocks may lack liquidity, which can hinder quick transactions and complicate position exits during price drops.
Read more: Small-cap stocks
Conclusion
Volatility in the stock market is inevitable as stocks fluctuate in price in real time. However, volatility can provide investors with good returns if they extensively analyse high-volatile stocks based on fundamental and technical factors. If you are looking to make profits in the short term, you can utilise the beta, which is the primary indicator of volatility. However, as volatile stocks are risky, ensure that you invest in volatile stocks that align with your risk appetite and investment goals.
Now that you know what volatile stocks are, you can analyse them better and make informed investment decisions.
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