Best High Volatile Stocks in India 2024

In this article, we will discuss

• Beta: The Primary Indicator of Volatility
• The Best Volatile Stocks in India in 2024
• Interpreting Beta
• How to Find High-Volatile Stocks?
• Conclusion

One of the many factors that influence how a stock performs is its volatility. It is a measure of the rate at which the price of an asset moves over time. The prices of high-volatile stocks, for instance, tend to change dramatically and unpredictably within a short period. Some traders thrive in such an environment as they can capitalise on these rapid price changes and generate significant returns in a short time frame.

Beta: The Primary Indicator of Volatility

The beta of a stock is one of the best indicators you can use to assess how volatile it is. This financial ratio is a measure of a stock’s volatility relative to the volatility of the overall market. The beta helps you identify volatile stocks and also gives you crucial insights into the level of uncertainty or risk associated with them.

A beta value of 1 indicates that the stock is just as volatile as the overall market. On the other hand, if the value is less than 1, it indicates that the stock is less volatile than the market. Finally, a beta value of more than 1 signifies that the stock is more volatile than the overall market.

Traders eager to capitalise on the price movements in highly volatile stocks often look for companies with a beta value higher than 1. That said, when selecting such stocks, you should not rely only on the latest beta value of a stock because it could merely be a temporary aberration or spike.

Instead, you should analyse beta values over different time frames to gauge the consistency of a stock’s volatility. A high beta over multiple different periods may indicate sustained volatility, making it an attractive option for volatility-based trading.

The Best Volatile Stocks in India in 2024

If you’re interested in trading in volatile stocks, here is a list of 10 stocks that have consistently recorded high beta values over multiple time frames. Since these stocks are more volatile compared to the overall market, they could potentially present you with attractive short-term trading opportunities.

Note: The beta values for all of the stocks mentioned in the table above are as of July 10, 2024.

Interpreting Beta

The beta is a good indicator of volatility and the inherent risk associated with the stock. Let us take one company from the above list — RBL Bank Limited — and interpret its beta values.

The 1-month beta value of RBL Bank Limited is 3.45, which indicates that the stock is 3.45 times more volatile relative to the overall market. This effectively means that if the overall market moves up by 1%, RBL Bank Limited is likely to move up by 3.45%, and vice versa.

However, as we look into the long-term price movements, you can observe that the beta value of RBL Bank Limited reduces. Take the 1-year beta, for example. The value is just 1.50, meaning that the stock is only 1.5 times more volatile compared to the overall market. So, if the overall market moves up by 1%, the stock is likely to move up by 1.5% over one year.

This brings us to a very important lesson. The impact of volatility on stocks is usually maximum in the short term. Over the long term, however, its impact tends to be more subdued and the outcomes of short-term market volatilities are often ironed out. Therefore, if you’re planning to trade in highly volatile stocks, it is important to keep this in mind and adjust your trading outlook accordingly.

That said, this may not always be the case for all stocks. Some stocks, especially those from the mid-cap and small-cap segments, may have a consistently high beta across both the short and long term. Adani Enterprises Limited and Bank of India Limited are two stocks that exhibit consistently high beta values above 2. Such stocks carry a high amount of risk, which you need to factor in when attempting to trade in them.

How to Find High-Volatile Stocks?

Beta is one of the most popular indicators of volatility. However, it is not the only indicator to rely on. You can also consider the standard deviation of stocks to gain more clarity about how volatile they may be. The standard deviation indicates how much the price of a stock has deviated from its mean or average price. The higher the standard deviation of a stock, the more volatile it is considered to be and vice versa.

Another easy way to find highly volatile stocks is to examine the constituents of the Nifty High Beta 50 index. It is a diversified index that consists of stocks with high beta values of more than 1.

That said, it is important to remember that not all stocks with a high beta or standard deviation may be liquid enough for trading. Some small-cap stocks tend to have very high betas, often above 10. However, their trading volume is usually very low, which makes it a lot harder to buy or sell them. So, when you are shortlisting high-volatile stocks for trading, make sure to also consider trading volume and liquidity in addition to a stock’s beta and standard deviation.

You can also check the NSE website to identify volatile stocks on a daily basis. The stock exchange publishes a daily volatility report for the F&O segment every day. By assessing the derivatives that are highly volatile and checking if this volatility stems from price fluctuation in the underlying stock, you can find viable companies for intraday trading and capitalise on their volatilty.

Conclusion

Trading in high-volatile stocks requires a high tolerance for risk, quick decision-making skills and a thorough understanding of market dynamics. While the potential for substantial gains exists, so does the risk of significant losses. If the market rapidly moves against your position, you could potentially end up with major losses. Therefore, when you are trading in volatile stocks, it's crucial to approach them with caution. It is also advisable to employ sound risk management strategies to reduce the impact of adverse market movements.

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