Investors often seek out liquid stocks for their ability to be easily bought and sold on the stock market without significantly impacting their prices. In 2024, amidst evolving market dynamics and economic fluctuations, identifying the best high liquid stocks in India becomes crucial for investors aiming to build a resilient and diverse portfolio. These stocks not only offer liquidity but also possess strong fundamentals, promising growth prospects, and stability in their price movements. In this blog, we'll explore some of the top liquid stocks in India that investors may consider adding to their investment portfolio in 2024.
What are Liquid Stocks Meaning?
In the stock market, liquidity is defined as the ease with which the stock can be purchased and sold without significantly affecting its price. The stock's liquidity is influenced by several factors such as the company’s size, the number of outstanding shares and the level of investor interest.
Investors usually prefer liquid stocks because they can be bought and sold easily without significantly affecting their stock price and high trading volume.
How to Use Liquid Stocks to Strategise in the Stock Market?
Take the BlinkX Route to Invest in Liquid Stocks
Factors to Consider Before Investing in Liquid Stocks
Risks, Challenges & Advantages of Investing in Liquid Stocks
Differences Between Liquid Stocks and Illiquid Stocks
List of Popular Liquid Stocks in India.
After learning about liquid stocks, let's explore the top 10 high liquidity stocks in India. The following table provides lists of popular stocks, including their industry, current share prices and market capitalisation.
Disclaimer: The information provided on the above stocks is for informational purposes only. It is crucial to conduct thorough research before making any investment decisions regarding these stocks. We do not recommend trading any stocks without comprehensive research and professional financial advice. Always consult with a certified financial advisor to ensure informed and appropriate investment choices.
How to Invest in Liquid Stocks?
Here are some strategies for investing in most liquid stocks or ways to find stocks that suit you:
How to Use Liquid Stocks to Strategise in the Stock Market?
For stock market strategies to be effective, understanding stock liquid or liquidity is vital. Based on different trading scenarios, here's how to use liquidity to strategies your trading:
A long-term investor doesn't have to worry about liquidity. Long-term holdings of stocks allow investors to weather periods of low liquidity. By contrast, day traders or swing traders require high liquidity since they trade over a very short period of time. Trading liquid stocks is essential for quickly executing trades and managing stop-loss orders, reducing exposure to market fluctuations.
To execute orders efficiently, short-term traders must navigate small price movements. For day traders, liquidity is essential to closing positions quickly to mitigate losses.
If you have a low-risk appetite, choosing the appropriate stocks is paramount. Although high-volume stocks may offer liquidity, they are often characterised by significant price volatility. By investing in medium-volatile, liquid stocks, you can achieve both liquidity and manageable risk.
Take the BlinkX Route to Invest in Liquid Stocks
To invest in liquid stocks through BlinkX, follow the steps below:
Step 1: Open a Demat account with BlinkX. Also, ensure the Demat account is linked with a pre-existing bank account to carry out smooth transactions.
Step 2: Through a mobile-based application or web browser, sign in to your Demat account.
Step 3: Next, choose the liquid stock you want to invest in.
Step 4: Ensure you have enough funds in your bank account to purchase the stock.
Step 5: Make a purchase at the stock’s listed price, specifying the number of shares.
Step 6: Once a seller reciprocates your request, the purchase order is executed. After the transaction is completed, the amount is debited from your bank account, and the shares are simultaneously credited to your Demat account.
Factors to Consider Before Investing in Liquid Stocks
Before investing in highly liquid shares, investors need to consider several factors. Some of the key factors include:
Expense Ratio: Investors prefer lower expense ratios. Liquid funds usually keep the expense ratio low by holding securities until maturity.
Investment strategy: An emergency fund can be created by investing in highly liquid stocks, which offer a reasonable return and high liquidity. They are well-suited for short-term goals. However, align your investment plan with objectives before investing.
Return Potential: Liquid funds may offer significant returns, making them suitable for idle cash.
Risk Analysis: A liquidity share has a short asset maturity (up to 91 days), which makes it low-risk. However, they aren't risk-free. When an underlying security's credit rating drops, the NAV can also drop.
Risks, Challenges & Advantages of Investing in Liquid Stocks
Liquid stocks may seem appealing due to their high trading volumes and accessibility, but it is important to recognise their risks and challenges. In the table below, let’s take an overview of the risks and benefits of investing in these stocks.
Risks and Challenges of Liquid Stocks
Advantages of Liquid Stocks
There can be sudden price swings in highly liquid stocks. These factors are driven by market sentiment and external factors, which necessitate vigilant monitoring and risk management.
Many buyers and sellers actively trade liquid shares. Therefore, they can be easily bought and sold in the market without substantially impacting stock prices.
Share liquidity can sometimes cause market detachment from the company’s fundamentals, necessitating thorough research before investing.
Due to their substantial trading volumes, highly liquid stocks have lower transaction costs than less liquid options stocks. Stock prices of liquid shares tend to be more stable because there are many buyers and sellers. As a result, their investment value is less likely to fluctuate significantly.
Liquidity attracts many traders, so you have to navigate competition effectively and time your trades.
Many liquid option stocks are listed on major stock exchanges, and these stocks are required to release regular financial reports to the public. Thus, informed decisions can be made based on the most current information available.
The price movements of high liquidity stocks can be influenced by herd behaviour, where emotional reactions can drive exaggerated price movements. Investing independently and disciplinedly is essential to avoid being swayed by the crowd.
You can diversify your portfolio by investing in liquid shares across sectors, industries, and geographies.
Differences Between Liquid Stocks and Illiquid Stocks
Based on the ease of trading, traders differentiate liquid stocks from illiquid ones. Due to high daily trading volumes, liquid shares can be brought or sold without significantly impacting their price. On the other hand, illiquid shares are traded in low volumes. As a result, they are difficult to buy or sell without affecting their price. Here is the table to understand 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
Transaction Costs
Low
High
Liquidity Risk
Low
High
Ease of buying and selling
Easy
Difficult
Price Discovery
Efficient
Inefficient
Transparency
High
Low
Market Impact Cost
Low
High
Conclusion Investing in highly liquid stock in India may be an appealing option for investors seeking easy buying and selling options. These stocks have high trading volume, which indicates active investor participation. Investors can invest in these stocks through an online stock trading app. These apps provide quick trade execution and facilitate convenient access to the stock market. The advantages of investing in liquid stocks are lower transaction costs and ease of buying and selling. However, investors must know risks like sudden price swings, herd behaviour, and competitive trading.
Found this insightful? Take the next step - Begin Investing
A stock's liquidity can be measured by how easy it is to buy and sell it at a stable price in its market. High-liquid markets allow assets to be sold, traded and bought quickly without causing significant price drops. A low-liquid market is exactly the opposite of a high-liquid market.
Liquidity is typically measured using the current, quick, and cash ratios.
There is an investment platform offered by every Asset Management Company (AMC) in India. This platform allows you to buy, sell, switch, initiate SIPs, and more. After registering on the platform and setting up your login details, you can begin investing in liquid stocks.
The lowest-risk option among debt funds is liquid funds, which invest primarily in short-maturity fixed-income securities. Therefore, they are suitable for risk-averse investors. However, investors should keep an eye on the market before investing.
The top three liquid stocks are Axis Bank, Bajaj Finance, and Tata Motors.
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