Most Volatile Penny Stocks to Invest in India

Investing in penny stocks can be a thrilling experience, especially in emerging markets like India. The Indian stock market is home to over 7,000 listed companies, with many of them being penny stocks.

Some of these penny stocks are indeed volatile, with prices fluctuating wildly due to various market and economic factors.

The article will focus on the most volatile penny stocks to invest in India, based on historical data and market trends.

Volatility is a statistical parameter that indicates the frequency and intensity with which the price of a stock fluctuates over a given period. The higher the price fluctuations in a stock, the greater volatility it is said to possess.

The greater the volatility in a stock, the higher the risk associated with the stock investment. Investors must have a clear-eyed assessment of their risk appetite before taking a position in a stock.

Stocks with high volatility imply a lot of risks but can also deliver stellar returns. Stocks with low volatility may denote low risk but are also most likely to deliver low returns in a shorter time-frame.

Here's a breakdown of stock tiers based on their price and listing requirements:

Volatility is a statistical parameter that measures the frequency and intensity of a stock's price fluctuations over a given period.

The higher the price fluctuations in a stock, the greater volatility it is said to possess, and the higher the risk associated with the stock investment.

Geo-political tensions, macroeconomic developments, liquidity conditions, and logistical issues can all impact a stock's volatility, often working together to either lower or raise its price.

The sector a company operates in and its financial health also play a role in determining how a stock price responds to market developments.

Stocks with high volatility can deliver stellar returns, but they also come with a lot of risks, while low-volatility stocks are likely to deliver low returns in the short term.

Volatility can be a wild ride, but understanding it is key to making informed investment decisions. The Securities and Exchange Commission (SEC) defines a penny stock as one trading under $5 without the benefit of a listing on a national stock exchange.

Penny stocks are often associated with high volatility, which means their prices can fluctuate rapidly. This is due to various factors such as geo-political tensions, macroeconomic developments, and liquidity conditions.

Investors must carefully assess their risk appetite before investing in penny stocks. Stocks with high volatility imply a lot of risks, but can also deliver stellar returns.

In the case of Intelligent Bio Solutions Inc., its price fluctuated from $0.96 to $0.96 on January 26, 2023, indicating a relatively stable price. However, other stocks like Tritium DCFC Limited and Organigram had prices of $1.31 and $1.2 respectively, which can be considered relatively high.

Here's a breakdown of the penny stocks mentioned earlier, categorized by their volatility:

Keep in mind that volatility can be influenced by various factors, including the sector in which the company operates and its financial health. Investors must research and understand these factors before making an investment decision.

Investing in penny stocks can be a high-risk, high-reward game, but it's essential to understand the landscape before diving in. Volatile penny stocks can provide valuable insight into market trends and the psychology of traders.

Penny stocks are often associated with small-cap companies, which can be more volatile due to lower market liquidity and trading volumes. For example, ITI Ltd, a smaller-cap stock, has experienced notable intraday swings recently, reflecting its volatility.

It's crucial to do your research and understand the company's financials, business model, and potential for growth before investing in penny stocks. A beta greater than the market can indicate a higher potential for returns, but also comes with increased risk. Many high-beta stocks come from the mid-cap and small-cap segments, making them more affordable.

Here are some key advantages and disadvantages of penny stocks to consider:

Frequent and substantial price swings are a hallmark of the most volatile stocks in India, with ITI Ltd and Mazagon Dock Shipbuilders Ltd experiencing notable intraday swings recently.

High beta values are another key feature of volatile stocks, with a beta greater than 1 indicating greater price sensitivity to market movements, as seen in Inox Wind Ltd with a beta of 1.86 and HUDCO with a beta of 1.70.

Smaller market capitalization is often a characteristic of volatile stocks, as lower market liquidity and trading volumes can lead to rapid price changes, a phenomenon observed in ITI Ltd.

Volatile stocks are highly reactive to news and external events, which can lead to rapid price changes, as seen in Zee Entertainment Enterprises Ltd following regulatory scrutiny.

Companies with irregular or unpredictable earnings often see greater stock price volatility, a trend observed in Vodafone Idea Ltd and Mazagon Dock Shipbuilders Ltd.

Historical volatility can serve as a predictor of future performance, underscoring the ongoing risks associated with these investments, as demonstrated by stocks that have demonstrated large price swings in the past.

Investing in penny stocks can be a thrilling experience, but it's essential to approach it with caution. Do your research and understand the company, its financials, business model, etc. to determine if the volatility is justified or just market noise.

It's crucial to invest for the long term, as quality stocks tend to go up in the long run, despite short-term fluctuations. This mindset will help you ride out the volatility and make informed decisions.

Use limits and stop losses to lock in profits and limit the downside when volatility spikes. Reassess your strategy periodically to ensure you're on the right track.

Don't allocate more than 10-15% of your portfolio to highly volatile stocks. Spread risk across multiple volatile stocks and sectors to minimize losses.

Take advantage of sudden price dips in quality stocks to buy more. This strategy can help you benefit from the upside and grow your investment.

Here are some key statistics to keep in mind when investing in penny stocks:

Remember, investing in penny stocks involves high risk, and it's essential to stay calm and review fundamentals to see if anything has changed. If not, wait out short-term volatility swings or buy more on dips.

If you're looking to buy penny stocks, you can start by checking out some of the leading platforms that allow penny stock trading.

One of the most popular platforms is the one mentioned in the article, which allows penny stock trading.

You can also consider other platforms that are mentioned in the article as options for buying penny stocks.

These platforms provide a convenient way to buy and sell penny stocks, making it easier for you to get started with investing in penny stocks.

Before diving into the world of most volatile penny stocks, it's essential to understand your own risk tolerance. Volatility can be measured and acted upon strategically to earn profits, making it a "friend" of active investors.

As an investor, you're likely loss-averse, preferring specific gains over potential ones. This is in line with the Prospect theory of behavioural finance.

To get started, consider investing in mid-cap and small-cap segments, as these stocks exhibit high price movements.

You should first ask yourself if you should invest in Volatile Stocks. Volatility can be measured and acted upon strategically to earn profits.

By nature, we are loss-averse investors, preferring specific gains over potential gains. This is also in line with the Prospect theory of behavioural finance.

Most of the derivatives markets heavily make money on volatility. A small corpus of funds can be kept to earn huge profits if you can time the market.

Generally, these stocks are from mid-cap and small-cap segments, which exhibit high price movements.

Getting started with online trading can be overwhelming, but let's break it down. Many penny stocks are not available on mainstream online brokers.

These brokers often avoid the OTC Market and Pink Open Market due to the added risk associated with them. Compare brokers closely to see which match your trading style.

Some online brokers will charge a significant commission for facilitating trade in these markets. You should factor these commissions into your calculations before choosing a broker.

Researching and comparing different brokers is crucial to find the right one for you.

Trading penny stocks can be one of the riskiest investment forms because the companies linked to the stock are usually new or undergoing turbulent times.

Regulated trading platforms like TradeStation, Fidelity, and eToro provide coverage for safeguarding client assets, which can offer some protection against inherent risks.

Investors should do their own research to verify the validity of a platform before signing up for an account.

Acting on panic triggered by market downturns is a common reason why many investors end up losing their initial investment corpus.

Embracing volatility can be key to earning handsome returns in the long run, but it requires sticking with your investment thesis during bear phases and market meltdowns.

Sudden market swings can erode the corpus of even experienced traders if they're not executed correctly.

A beta of 1 means that the stock volatility is the same as that of the benchmark.

To identify highly volatile stocks, consider the Average True Range (ATR) which measures the volatility of a stock price after taking into account upswings and downturns in the stock price.

A beta greater than 1 indicates that the stock is more volatile than the market.

Typically, ATR looks at the last 14 periods, which may be daily, weekly, monthly or yearly.

Market sentiment makes a massive difference to the range in which a stock price operates.

Identifying high performers in the stock market requires a keen eye for volatility. Volatility in the penny stock market can provide valuable insight into how trends are moving.

Consider a stock's beta to gauge its volatility. A beta of 1 means the stock's volatility is the same as the market's, while a beta greater than 1 indicates it's more volatile.

Average True Range (ATR) is another tool to measure volatility. ATR looks at the last 14 periods, which can be daily, weekly, monthly, or yearly.

Market developments also play a significant role in determining a stock's volatility. Market sentiment and other developments within the segment and economy can greatly impact a stock's price range.

Higher option pricing hints at elevated volatility in a stock's price. Traders regularly monitor option prices to understand a stock's price range and movement.

A beta of less than 1 indicates a stock is less volatile than the market. This can be a good sign for investors looking for stable returns.

For short-term calculations of volatility, consider the last 10-12 periods. This can help you quickly identify stocks with high volatility.

Suzlon Energy Ltd was once a pick by Rakesh Jhunjhunwala, a well-known investor.

The company was struggling with continuous losses, which were reflected on its books.

Suzlon Energy Ltd eventually recovered and posted a positive operating profit.

This recovery stage was marked by substantial price swings of almost 25% of the base price in the market.

The stock price of Suzlon Energy Ltd experienced significant fluctuations, creating opportunities for intraday trading.

Velo3D is a metal 3D printing company that has seen its stock price tumble over 13 percent to close at $1.57 on its most recent open market day.

The company's stock has been highly volatile, shedding over 28 percent of its value in the last month and a whopping 71.2 percent over the trailing 12-month period.

Velo3D's devices have been used in the oil and gas industry to print large specialty components for extraction equipment.

The company's stock currently trades at 3.7 times sales, which is a concern for potential overvaluation.

Velo3D is expected to lose $0.10 per share in the coming 12 months, a considerable improvement over the $0.29 per share lost in the trailing 12-month period, but not a good sign for the stock's performance.

Five insiders have sold shares of the company valued at over $315,000 in the last 12 months, while no insiders have purchased additional shares, indicating a lack of management confidence in the long-term future of the company.

A recent debt offering of $105 million has also contributed to Velo3D's high levels of volatility, with shares dropping nearly 16 percent the day the announcement was made.