When the stock market experiences peaks and falls, the perspective of the entire financial sector changes. When the ups and downs occur frequently, we overestimate the risk to the downside.
This potential loss on the downside causes enough anxiety to make investors avoid the stock. But it is undeniable that the risky, volatile stock has financial benefits. A statistical measure called volatility gauges the range of returns for a specific stock or market index. The variance or standard deviation between results is used to quantify this variation.
The amount a stock will diverge from its initial price, also known as its mean price, when it is traded is the measure of its volatility. This could be compared to a pendulum. The pendulum is believed to be more volatile the further it deviates from its mean (original) position. Volatility increases when swings become more violent, and vice versa.
When volatility is strong, the dispersion will be more thorough and the price range will be greater. A stock with low volatility is the exact opposite.
Investing in the stock market can be a profitable venture, but it also comes with its share of risks. Volatility is one such risk that investors must be prepared to face. Volatility refers to the degree of fluctuation in the price of a stock over a period of time. Some stocks are more volatile than others, and investors who are comfortable with taking on more risk may be interested in exploring these options.
What are Volatile Stocks?
Stocks, also known as shares or equities, are ownership units in a publicly traded company. When a company decides to go public, it issues shares that can be bought and sold on the stock market. By buying a stock, an investor becomes a partial owner of the company and has a claim on its assets and earnings.
Stocks can be traded on exchanges, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India, where buyers and sellers come together to buy and sell shares of publicly traded companies. The price of a stock is determined by supply and demand, and can fluctuate based on a variety of factors, including company performance, economic conditions, and global events.
Investors can profit from stocks in two ways: capital gains and dividends. Capital gains occur when the value of a stock increases over time, allowing the investor to sell the shares at a higher price than they paid for them. Dividends are payments made by a company to its shareholders as a portion of its profits. Some investors buy stocks specifically for their dividend payouts.
Volatile stocks are stocks that have a tendency to fluctuate in price significantly over a short period of time. The degree of fluctuation or volatility is usually measured using the stock’s beta value, which indicates the stock’s sensitivity to market movements. A stock with a beta value of 1 is considered to have the same level of volatility as the overall market, while a stock with a beta value greater than 1 is considered to be more volatile than the market. Conversely, a stock with a beta value less than 1 is considered to be less volatile than the market.
Volatile stocks can be appealing to investors who are looking for the potential for high returns, as they offer the opportunity to buy low and sell high in a short period of time. However, they also carry a higher level of risk, as the price can fall just as quickly as it rises, and investors may experience significant losses if they are not careful.
Investors who are interested in investing in volatile stocks should approach these investments with caution and be prepared to monitor them closely. It is also important to have a diversified portfolio to manage risk and potentially mitigate the impact of market fluctuations. Ultimately, investors should consider their investment goals and risk tolerance before making any investment decisions. A financial advisor can also be a valuable resource to help investors make informed decisions and manage their risk.
Volatile stocks are often associated with companies that operate in industries with rapidly changing market conditions, such as technology or biotech. These companies often have a high level of uncertainty and may experience rapid growth or decline based on a single news item or event.
Investors who are interested in volatile stocks should also be aware of the potential for market manipulation or fraud, particularly in the case of penny stocks. Some companies may use tactics to artificially inflate the price of their stock, only to sell off their shares and leave investors with losses.
In India, the most volatile stocks are often found in the mid-cap and small-cap categories, where the companies may be less established and have less predictable revenue streams. These stocks may experience significant price swings in response to company news, economic data, or other market events.
While volatile stocks can offer the potential for high returns, it is important for investors to approach these investments with caution and to have a clear understanding of the risks involved. Thorough research, diversification, and a long-term investment strategy can help to mitigate these risks and potentially improve the chances of success.
Top 15 Most Volatile Stocks In India
Here are the top 15 most volatile stocks in India:
Adani Total Gas Ltd. (ATGL)
Adani Total Gas Ltd. is a city gas distribution company that operates in the natural gas industry. The stock has a beta value of 2.6, indicating high volatility.
Adani Enterprises Ltd. (ADEL)
Adani Enterprises Ltd. is a diversified conglomerate with interests in ports, logistics, and energy. The stock has a beta value of 2.5.
GMR Infrastructure Ltd. (GMRINFRA)
GMR Infrastructure Ltd. is a developer and operator of infrastructure projects such as airports and highways. The stock has a beta value of 2.3.
Adani Power Ltd. (ADANIPOWER)
Adani Power Ltd. is a power generation and distribution company. The stock has a beta value of 2.2.
Tata Motors Ltd. (TATAMOTORS)
Tata Motors Ltd. is a multinational automotive manufacturing company. The stock has a beta value of 2.1.
Bharat Electronics Ltd. (BEL)
Bharat Electronics Ltd. is a state-owned aerospace and defense company. The stock has a beta value of 2.0.
Indiabulls Housing Finance Ltd. (IBULHSGFIN)
Indiabulls Housing Finance Ltd. is a non-banking financial company that offers home loans and other financial products. The stock has a beta value of 1.9.
Vodafone Idea Ltd. (IDEA)
Vodafone Idea Ltd. is a telecommunications company that provides mobile and internet services. The stock has a beta value of 1.8.
Tata Steel Ltd. (TATASTEEL)
Tata Steel Ltd. is a multinational steel-making company. The stock has a beta value of 1.7.
Reliance Power Ltd. (RPOWER)
Reliance Power Ltd. is a power generation and distribution company. The stock has a beta value of 1.6.
Zee Entertainment Enterprises Ltd. (ZEEL)
Zee Entertainment Enterprises Ltd. is a media and entertainment company that operates television channels and streaming services. The stock has a beta value of 1.5.
Power Finance Corporation Ltd. (PFC)
Power Finance Corporation Ltd. is a state-owned company that provides financial services to the power sector. The stock has a beta value of 1.4.
IDFC First Bank Ltd. (IDFCFIRSTB)
IDFC First Bank Ltd. is a private sector bank that offers banking and financial services. The stock has a beta value of 1.3.
Mahindra & Mahindra Ltd. (M&M)
Mahindra & Mahindra Ltd. is a multinational automobile manufacturing company. The stock has a beta value of 1.2.
Maruti Suzuki India Ltd. (MARUTI)
Maruti Suzuki India Ltd. is a subsidiary of Suzuki Motor Corporation and is the largest automobile manufacturer in India. The stock has a beta value of 1.1.
It’s important to note that high volatility can indicate higher risk, and investors should do their due diligence before investing in any stock. It’s also crucial to have a diversified portfolio to manage risk and potentially mitigate the impact of market fluctuations. Investors should also consider their investment goals and risk tolerance before making any investment decisions.
Furthermore, volatility can be a double-edged sword. While high-volatility stocks offer the potential for greater returns, they also pose a greater risk of losses. Investors should be prepared to monitor these stocks closely and have an exit strategy in place if necessary.
In conclusion, the above-mentioned stocks are some of the most volatile stocks in India. Investors who are willing to take on more risk may find these options appealing, but it’s essential to approach any investment with caution and do thorough research before investing. A financial advisor can also be a valuable resource to help investors make informed decisions and manage their risk.