Top Liquid Shares for Intraday Trading: Meaning, Factors & Risks

Looking for stocks that don’t get your money stuck in the markets? Look no further than liquid stocks! 

These stocks offer a clear pathway to investment success, providing easy buying and selling options, low transaction costs, and higher price stability. With their transparency and diversification, liquid stocks are the perfect starting point for investors of all levels. 

In this blog, we’ll explore the ins and outs of highly liquid stocks in India . So, let’s take the plunge and discover the world of liquid stocks!

Let’s understand what is a Liquid Stock first, and how to identify liquid stocks.

What are Liquid Stocks Meaning?

Stock market liquidity refers to the ease with which an investor can buy or sell a stock without significantly affecting its price. Various factors, such as the company’s size, the number of outstanding shares, and the level of investor interest in the stock, influence the level of liquidity in a stock.

Liquid stock means shares that can be easily bought and sold in the market without significantly affecting their prices. A large number of investors actively trade these stocks, indicated by their high trading volume. The high trading volume characterizes what is liquid shares are as we know them.

Typically, blue-chip companies with large market capitalization and strong financials are considered liquid shares meaning. They are popular among investors because of their ease of buying and selling, low transaction costs, and high price stability.

Now that we know what are liquid stocks in India, let’s take a look at the list of the best liquid stocks in India.

List of Popular Liquid Stocks in India. 

Here is a liquidity stocks list consisting of a curated array of stocks for educational purposes:

Name	Sub-Sector	Market Cap (Rs. in cr.)	Close Price (Rs.)	PE Ratio
Vodafone Idea Ltd	Telecom Services	111,589.41	16.01	-3.57
Suzlon Energy Ltd	Renewable Energy Equipment & Services	109,571.41	76.54	165.93
Yes Bank Ltd	Private Banks	76,530.68	23.94	59.55
HFCL Ltd	Telecom Equipments	20,245.55	140.42	61.39
Inox Wind Ltd	Heavy Electrical Equipments	27,190.62	208.55	-672.70
Indian Railway Finance Corp Ltd	Specialized Finance	241,192.35	184.56	37.62
Rail Vikas Nigam Ltd	Specialized Finance	120,065.88	575.85	76.27
Zomato Ltd	Online Services	229,245.98	267.09	653.12
IDFC First Bank Ltd	Private Banks	53,690.44	71.79	18.25
NBCC (India) Ltd	Construction & Engineering	32,720.40	181.78	81.48

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data in the Liquid Stocks list is from 12th August 2024.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

Why Invest in Liquid Stocks?

Unlike holding debt funds over an extended period, which can pose higher risks, liquid funds stand out as one of the safest choices for investors due to their 91-day maturity period. The minimal risks associated with liquid funds stem from their short-term underlying securities.

It is also important to note why liquidity matters while investing in the stock market. Liquidity matters while buying a stock because illiquid stocks can be difficult to sell, leading to price high volatility and increased risk for investors.
Investors may experience significant losses when they are forced to sell their shares at a substantial discount in certain cases. Therefore, it is crucial to consider the liquidity of a stock before investing in it. Once you understand what constitutes a liquid stock, it’s crucial to actively measure how liquidity operates.

Who Should Invest in Liquid Stocks?

You may investing in penny stocks that are liquid if you have a low tolerance for risk and are looking for a superior alternative among secure investment options such as fixed deposits, savings accounts, and debt funds. Liquid funds offer relatively lower risks and can be an attractive choice for risk-averse investors seeking stability in their investments.

How Do You Measure Liquidity?

You can measure by trading volume, bid-ask spreads, and market depth. Here, trading volume refers to the total number of shares of a stock that are bought and sold in a given time period. 

Bid-ask spreads represent the difference between the highest price that a buyer is willing to pay for a stock and the lowest price that a seller is willing to accept. And market depth refers to the amount of buy and sell orders available at different price levels. Now that we know what is liquidity in stock markets, let’s check out the top liquid stocks in India:

Top Liquid Stocks in India: An Overview

Here is a basic overview of the high liquidity stocks in India right now. 

Vodafone Idea Ltd

Vodafone Idea Ltd was formed in 2018 through the merger of Vodafone India and Idea Cellular, combining the strengths of both companies to become one of India’s largest telecom service providers. The company offers a wide range of mobile and data services across India, serving millions of customers with extensive network coverage. Vodafone Idea Ltd has a market capitalisation of Rs. 1,11,589.41 cr. and a PE ratio of -3.57.

Suzlon Energy Ltd

Established in 1995, Suzlon Energy Ltd is a key player in India’s renewable energy sector, focusing on the design, manufacturing, and maintenance of wind turbines. The company has significantly contributed to the growth of wind energy in India and operates globally with a presence in several countries. Suzlon Energy Ltd has a market capitalisation of Rs. 1,09,571.41 cr. and a PE ratio of 165.93.

Yes Bank Ltd

Founded in 2004, Yes Bank Ltd is a prominent private sector bank in India, offering a wide range of banking and financial services including retail banking, corporate banking, and asset management. The bank has established a strong presence in the Indian financial sector with a large customer base and innovative banking solutions. Yes Bank Ltd has a market capitalisation of Rs. 76,530.68 cr. and a PE ratio of 59.55.

HFCL Ltd

HFCL Ltd, originally known as Himachal Futuristic Communications Ltd, was established in 1987 and has grown to become a leading telecom equipment manufacturer in India. The company provides a broad spectrum of telecom and networking products, including optical fiber cables, broadband equipment, and telecom software. HFCL Ltd has a market capitalisation of Rs. 20,245.55 cr. and a PE ratio of 61.39.

Inox Wind Ltd

Inox Wind Ltd, founded in 2009, is a significant player in the renewable energy sector, focusing on the manufacture and sale of wind turbine generators and providing wind energy solutions. The company operates several wind farms across India and supports the country’s efforts to increase its renewable energy capacity. Inox Wind Ltd has a market capitalisation of Rs. 27,190.62 cr. and a PE ratio of -672.70.

Indian Railway Finance Corporation Ltd

Indian Railway Finance Corporation Ltd (IRFC) was established in 1986 as the dedicated financing arm of the Indian Railways, tasked with raising financial resources for the expansion and development of the railway infrastructure. IRFC plays a crucial role in the modernisation of Indian Railways by providing the necessary funding. The company has a market capitalisation of Rs. 2,41,192.35 cr. and a PE ratio of 37.62.

Rail Vikas Nigam Ltd

Founded in 2003, Rail Vikas Nigam Ltd (RVNL) is a specialised finance company under the Ministry of Railways, responsible for implementing and funding railway projects across India. The company plays a vital role in expanding and upgrading India’s railway infrastructure, contributing to several key projects. Rail Vikas Nigam Ltd has a market capitalisation of Rs. 1,20,065.88 cr. and a PE ratio of 76.27.

Zomato Ltd

Zomato Ltd, launched in 2008, is one of India’s leading online food delivery platforms, providing restaurant discovery, food delivery, and related services across the country. The company has rapidly expanded its presence globally, catering to millions of users with its robust online platform. The company has a market capitalisation of Rs. 2,29,245.98 cr. and a PE ratio of 653.12.

IDFC First Bank Ltd

IDFC First Bank Ltd was founded in 2015 following the merger of IDFC Bank and Capital First, creating a new-age private sector bank in India. The bank offers a range of financial products and services, including retail loans, corporate banking, and wealth management, with a focus on serving both urban and rural markets. IDFC First Bank Ltd has a market capitalisation of Rs. 53,690.44 cr. and a PE ratio of 18.25.

NBCC (India) Ltd

NBCC (India) Ltd, established in 1960, is a government-owned construction and engineering company specialising in project management consultancy, civil infrastructure, and real estate development. The company has executed numerous high-profile projects in India and abroad, contributing to urban development and infrastructure growth. NBCC (India) Ltd has a market capitalisation of Rs. 32,720.40 cr. and a PE ratio of 81.48.

How to Invest in Liquid Stocks?

Now that we know what is liquidity in stocks, here are some common strategies for investing in most liquid shares or tips on how to find liquid stocks that suit your needs:

1. Value Investing

This strategy involves identifying stocks that are the best liquid stocks for intraday trading tomorrow or in the future, at a discount to their intrinsic value. Investors look for companies with strong fundamentals, such as a low price-to-earnings ratio, high dividend yield, and strong financials. The goal is to buy undervalued stocks and hold them for the long term until the market recognizes their true value.

2. Growth Investing

This strategy focuses on identifying companies that might experience strong growth in the future. Investors look for companies with high earnings growth rates, expanding market share, and strong management teams. The goal is to buy growth stocks with high growth potential and hold them for the long term to benefit from future growth.

3. Technical Analysis

This strategy involves analyzing stock price and trading volume data to identify patterns and trends. Investors use technical indicators and charting tools to identify potential buying or selling opportunities. The goal is to profit from short-term price movements based on technical signals.

4. Buy and Hold Strategy

This strategy involves buying quality stocks and holding them for a long period of time, regardless of short-term market fluctuations. Investors look for companies with strong fundamentals, such as a competitive advantage, strong financials, and a history of consistent growth. The goal is to generate long-term capital appreciation and potentially earn dividends along the way.

How to Use Liquid Stocks to Strategize Your Stock Market Game Plan?

Understanding stock liquidity is crucial for devising effective stock market strategies. Here’s how liquidity impacts different trading scenarios:

Liquidity isn’t a critical concern for long-term investors. Holding stocks over extended periods allows investors to weather periods of low liquidity, and medium-volatile stocks are often recommended for lower risk.

In contrast, day traders or swing traders require high liquidity due to their short timeframes. Liquid stocks are essential for swiftly executing trades and managing stop-loss orders, minimizing exposure to market fluctuations.

Short-term traders must navigate small price movements to execute orders efficiently. Liquidity is pivotal in swiftly closing positions to mitigate losses, making it indispensable for day traders.

For those with a low-risk appetite, choosing appropriate stocks becomes paramount. High-volume stocks may offer liquidity but often exhibit significant price volatility. Opting for medium-volatile, liquid stocks strikes a balance, providing both liquidity and manageable risk levels.

Take the smallcase Route to Invest in Liquid Stocks

At smallcase, you are able to invest in stocks/ETFs based on a common theme and the MI_ST_ATH smallcase focuses on stocks nearing their all-time highs, a trend backed by extensive research indicating their sustained performance potential. This strategy employs a concentrated portfolio of up to 10 stocks, each equally weighted, selected from NSE listed universe with stringent criteria including very high turnover and market capitalization of 1000cr or more. Stock selection is based on momentum ranking and proximity to their all-time highs, with performance measured through absolute momentum. 

Weekly portfolio reviews ensure adherence to exit criteria for underperforming stocks, with replacements sourced when momentum picks are unavailable, utilizing cash reserves in interest-bearing instruments like LIQUID BEES. The portfolio operates without managerial discretion, relying on rigorous backtesting to validate its effectiveness. Optimal investment size ranges from INR 5 to 30 lacs.

Mi_ST_ATH smallcase by Weekend Investing

Factors to Consider Before Investing in Liquid Stocks

Here are a few crucial factors to consider for Liquid Fund Investments:

1. Risk Analysis: Liquidity shares are low-risk due to short asset maturities (up to 91 days). However, note that they aren’t entirely risk-free. A drop in an underlying security’s credit rating can impact the NAV.
2. Return Potential: Liquid funds typically offer 7-9% returns, surpassing savings accounts (usually 4%). It is attractive for idle cash.
3. Expense Ratio Impact: Investors favour lower expense ratios. Liquid funds keep these costs low by holding securities until maturity.
4. Investment Strategy: Highly Liquid Stocks are ideal for creating emergency funds, with reasonable returns and high liquidity. They are suited for short-term goals (around 3 months). Align your plan with objectives before investing.

However, investors must do their own research and/or consult their financial advisor before investing.

Risks and Challenges of Investing in Liquid Stocks

Investing in liquid stocks can be enticing due to their high trading volumes and accessibility, but it’s important to recognize the risks and challenges that come with them. Here are the key points to keep in mind:

• Price Volatility: Highly Liquid stocks in NSE are prone to sudden price swings. Market sentiment and external factors drive them, necessitating vigilant monitoring and risk management.
• Fundamental Disconnect: Liquidity of shares can sometimes lead to market detachment from a company’s fundamentals, necessitating thorough research to avoid investing solely based on short-term market sentiment.
• Intense Competition: High liquidity attracts a multitude of traders, making it vital to time your trades and navigate competition effectively.
• Herd Mentality: High Liquid stocks are susceptible to herd behavior, where emotional reactions can drive exaggerated price movements. Maintaining an independent and disciplined investment approach is crucial to avoid being swayed by the crowd.

Advantages of Investing in Liquid Stocks

Some of the benefits of investing in liquid stocks are as follows:

• Ease of buying and selling stocks: Many buyers and sellers actively trade liquid shares. This implies that individuals can readily buy or sell them in the market without substantially impacting the stock price.
• Low transaction costs: Highly liquid stocks result in lower transaction costs than less liquid options stocks due to their substantial trading volumes. This can help you save on brokerage fees, bid-ask spreads, and other transaction costs.
• Higher price stability: Liquid shares tend to have a more stable stock price due to many buyers and sellers. This can give you a sense of security, as they are less likely to experience significant fluctuations in their investment value.
• Transparency: Major stock exchanges often list liquid option stocks, and these stocks must regularly disclose financial reports and information to the public. This makes it easier to make informed decisions based on the latest information available.
• Diversification: Investing in liquid shares allows you to diversify your portfolio across different sectors, industries, and geographies. This can help to reduce risk and provide a buffer against market volatility.

Differences Between Liquid Stocks and Illiquid Stocks

Traders distinguish liquid stocks from illiquid ones based on the ease of trading.

Liquid shares are shares that are traded in high volumes on a daily basis and hence can be easily bought or sold without significantly impacting their price. On the other hand, illiquid stocks are those that are traded in low volumes and are difficult to buy or sell without affecting their price. 

Check out the table below to understand more about the differences between liquid and illiquid stocks.

Feature	Liquid Stocks	Illiquid Stocks
Trading Volume	High	Low
Bid-ask spread	Narrow	Wide
Price Stability	High	Low
Market Depth	High	Low
Liquidity Risk	Low	High
Ease of buying and selling	Easy	Difficult
Transaction Costs	Low	High
Transparency	High	Low
Price Discovery	Efficient	Inefficient
Market Impact Cost	Low	High

How to Identify Liquid and Illiquid Stocks?

Identifying liquid and illiquid stocks is essential for you to make informed decisions when selecting shares for your portfolios. Analyzing the trading volume and bid-ask spread determines a stock’s liquidity. Active daily trading characterizes liquid shares, as they generally boast a high trading volume.One way to identify liquid shares is to look for companies that are part of major stock markets indices, such as the S&P 500 or Dow Jones Industrial Average.

Illiquid stocks, on the other hand, tend to have low trading volumes and higher bid-ask spreads, which makes them difficult to buy and sell. You can also identify illiquid stocks by looking at their average daily trading volume and bid-ask spread. You may find stocks less attractive if they have low trading volume and wide bid-ask spreads, as these are generally considered illiquid. Additionally, the use of financial tools such as liquidity ratios and trading volumes can also help in identifying liquid and illiquid stocks.

To Wrap It Up…

Investing in liquid shares can provide investors with several benefits, including ease of buying and selling shares, low transaction costs, higher price stability, transparency, and diversification. Liquid stocks are also attractive because they can offer higher returns and reduced risk compared to illiquid stocks. However, it is essential to consider the market conditions, industry trends, and company performance before making any investment decisions. 

Moreover, you can build your own low-cost, diversified portfolio with the help of smallcase. It is a modern investment product that provides you with ready-made portfolios based on specific themes and ideas. So, what are you waiting for? Download the smallcase app and begin your investment journey today!

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