Last Updated on Jan 31, 2024 by Anjali Chourasiya
Intraday trading is a popular strategy in which traders buy and sell stocks within the same trading day, aiming to profit from short-term price fluctuations. One key factor for successful intraday trading is identifying liquid stocks with sufficient trading volume and volatility. Liquidity ensures ease of entry and exit from trades, while volatility presents opportunities for potential gains. In this article, let’s explore high liquidity stocks for intraday trading, and dive deep into liquidity in the stock market, the advantages of investing in the best liquidity stocks for intraday, how to strategise trade plans, and more.
What is liquidity in the stock market?
Liquidity in the stock market refers to the ease with which stocks can be bought or sold in the market without affecting their price significantly. High liquidity in a stock means that there are a large number of buyers and sellers, facilitating smooth and rapid transactions. Conversely, low liquidity indicates fewer participants in the market, leading to difficulty in buying or selling stocks without experiencing a substantial price change.
In simple words, the liquidity of a stock is the metric that determines how accessible your investment is and how easily and efficiently it can be converted into cash. Liquid stocks, thus, are stocks that can be easily liquidated – that is, converted to cash. Most large-cap stocks are liquid stocks.
What is liquid stock?
Liquidity in stock indicates how easily a stock can be bought and sold in the market without impacting its price. Before investing in a stock, it is imperative to evaluate it on various parameters. Apart from metrics such as past growth rate, return potential, and risk, the liquidity of the stock must also be considered. As an investor, it is important that you understand the liquidity of the stock before making an investment decision, especially should you have a shorter investment horizon.
What are illiquid stocks?
Stocks, known as illiquid stocks, are often in low demand for various reasons. These cannot be sold easily as there is limited trading for these stocks; that is, the number of sellers on the market may not match the number of buyers of the stock. This poses a threat, and it could become challenging to find buyers for these stocks at the price the seller wants to sell at.
An investor’s inability to exit a stock when they want to defeats the purpose of investing in equity at all. Other risks of illiquid stocks include turbulent price movements, high spreads, and tough executions.
List of high liquidity stocks for intraday
|Market Cap (Rs. in cr.)
|Close Price (Rs.)
|IRB Infrastructure Developers Ltd
|Construction & Engineering
|Vodafone Idea Ltd
|Yes Bank Ltd
|Jaiprakash Power Ventures Ltd
|Indian Renewable Energy Development Agency Ltd
|NBCC (India) Ltd
|Construction & Engineering
|Suzlon Energy Ltd
|Renewable Energy Equipment & Services
- Market Capitalisation: Set the lower limit to 10000
- Daily Volume: Set the lower limit to 20000000 – Sort from highest to lowest.
Note that these stocks are in no order of preference. Please note that these stock selection criteria and the stocks are provided for informational purposes only; it is essential to conduct your research.
Details of the top 3 best liquidity stocks for intraday
IRB Infrastructure Developers Ltd
Established in 1998, IRB Infrastructure Developers Limited is a road build–operate–transfer (BOT) operator. The company’s principal activity is the construction and maintenance of roads. IRB Infrastructure Developers is a mid-cap company with a market capitalisation of Rs. 36,203.81. It had the highest daily volume on 30th January 2024.
As per the Tickertape Scorecard, the stock has a moderate number of red flags and is in the overbought zone. Learn more about its performance, profitability and financial growth here.
With a market capitalisation of Rs. 87,341.58, NHPC Ltd. is engaged in electricity generation through hydroelectric power plants. As per the Tickertape Scorecard, the large-cap company has no red flags.
The stock is .37x as volatile as Nifty. Further, the stock is underpriced and is not in the overbought zone. The expected returns, revenue and earnings growth of the company are lower than their current 3-yr CAGR figures. Learn more about it here.
Vodafone Idea Ltd
Operating in the telecom services sector, Vodafone Idea Ltd was formerly Idea Cellular Limited. With a market capitalisation of Rs. 71,559.14 cr., Vodafone Idea Ltd is a mid-cap company. The stock is 5.48x as volatile as Nifty.
It also shows average signs of profitability with a 5.1 out of 10 in the Profitability Score on the Tickertape Scorecard. Over the last 5 yrs, the revenue has averaged 9.66%, vs the industry average of 7.37%. Click here to learn more about its financials.
Why does liquidity matter while buying a stock?
Liquidity mainly impacts two key elements of the market:
- Price spread: This is the difference between the market’s buy orders and sell orders. It indicated the difference between the price paid by the buyer and the net price received by the seller. Liquid stocks offer tight spreads between the prices and ensure a higher level of certainty in an asset price. In contrast, illiquid stocks have high price spreads. Hence, their price level is uncertain.
- Slippage: This indicates the difference between the expected price of a trade and the price at which the trade is executed. As market prices change quickly, slippage can occur at any time but is most common during periods of higher volatility and during inefficient market conditions.
There is positive slippage when the ask price decreases in a long trade or bid price increases in a short trade; and there is negative slippage when the ask price increases in a long trade or bid price decreases in a short trade.
Factors affecting the liquidity of stocks
Trading volume: Higher trading volumes generally denote higher liquidity. An increase in trading activity implies that there are more buyers and sellers who intend to engage in trades.
Number of market participants: If the markets have a greater number of participants, then the liquidity will be higher. These may be the retail investors, institutional investors, or even market makers.
Size of company and profile: Shares of bigger and more established companies tend to attract investors’ interest and, hence, are normally more liquid.
Market conditions: Liquidity in the market may be influenced by changing economic conditions or by regulation, as well as by an event that has occurred in a foreign part of the world. For example, during a period of heightened uncertainty, liquidity naturally always contracts.
How to identify high liquidity stocks?
Let’s take a close look at the three main indicators that help us identify a liquid stock:
- The difference between the bid price and the ask price is less.
A narrow bid-ask spread takes place when the bid and the ask price have a small difference. Such a situation also indicates that more buyers are interested in buying the stocks at a price suitable to the sellers. Such a market condition indicates that stocks are liquid enough to sell.
The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask) for a security. It’s a key indicator of a security’s liquidity, with narrower spreads usually signalling higher liquidity.
- Trade volume is high.
High trade volumes indicate that a higher number of shares are bought and sold on a given day. High trade volume is a positive sign as it shows that the stock is in demand and has a large number of prospective buyers. Yes, all in all, it is a positive sign of liquid stock.
- The stocks have high trade volume during a high float.
Float is the number of shares that are publicly owned and available on the market for trade. In a nutshell, a high float means a higher number of shares available for trading. A high trade volume during a high float is a sure sign that the higher number of available shares are also being traded at a high rate, thus insinuating a liquid stock.
Key things to consider before investing in liquid stocks
Here are 7 key factors to consider when investing in liquid stocks.
- Strong company fundamentals: Evaluate the company’s fundamentals, such as its financial health, debt-to-equity ratio, positive free cash flow, and more. Check if the company has growth prospects or is stable.
- Volatilities: Some stocks are liquid but volatile. Hence, before investing, check and analyse the price swings that the stock may experience.
- Cyclical nature: Some liquid stocks may be cyclical and belong to industries that have a cyclic trend. This cyclic trend helps in predicting possible ups and downs in stock liquidity.
- Regulatory changes: Sudden changes in a sector’s regulatory environment may affect its stocks’ liquidity. Be aware of possible legislative shifts.
- Orders in layers: In addition to the trading volume, consider the market depth, which demonstrates the number of buys and sell orders at different price levels. A stock with many orders lined up beyond the top bid and ask prices normally has deeper market depth, which adds to its liquidity.
- Consistency in dividends: Regular and consistent dividend-paying stocks usually attract more investment, contributing to their liquidity. However, a sudden change in a dividend policy can affect an investor to the point of changing their overall sentiment, thereby affecting the stock’s liquidity.
- Historical liquidity trends: Historical liquidity patterns can provide insights into how a stock’s liquidity responds to different market conditions. Hence, analysing the historical liquidity trends of a stock may help in informed decision-making.
Advantages of Investing in Liquid Stocks
Some benefits of investing in liquid stocks are as follows:
Ease of transaction: Their high liquidity means you can easily procure or dispose of these stocks with minimum influence on the price, making it good for either a short- or long-term strategy.
Better price discovery: Liquid stock often facilitates better price discovery where the value of what the market holds in the company is well depicted.
Flexibility: The investor can enter or exit the trade without causing a substantial movement in the stock price.
Reduced spread costs: Since liquid stocks have narrower bid-ask spreads, the transaction cost is reduced.
Risks and challenges of investing in high liquidity stocks
While liquid stocks for intraday present opportunities for gains, they also carry certain risks. Here are 3 challenges you may face while investing in high-liquidity stocks.
- Market volatility: The high liquidity of a stock suggests that it is not cushioned from market volatility. Stocks enjoying high liquidity can also prove volatile, with sudden price swings arising due to unexpected uncontrollable circumstances.
- Risk of overtrading: Liquid stocks’ quick and easy trading facility could lead investors to engage in overtrading, raising transaction costs while eating out returns.
- Research complacency over liquid stocks: Investors could lack extensive research because liquid stocks provide a facade of safety.
How to strategise trade plans with liquid stocks?
Let’s understand how stock liquidity plays an important role in strategising your stock market game plan and how to use liquidity in different scenarios:
If you want long-term investments: In such cases, liquidity does not matter crucially, so hold the stocks for a longer time. In fact, for the long-term, financial experts often suggest medium-volatile stocks to maintain lower risk.
Long-term investors can afford to sit on the bid, as liquidity is not an issue at all. If you are a long-term investor, you may be able to tide over periods of illiquidity and wait for new buyers or sellers to eventually show up.
If you are keen on intra-day trading: For a day-trader or swing-trader, liquidity matters the most because of the short time frame of the trade. In order to not hold your stock position open for a long time, it is crucial that you pick liquid stock. Liquidity is, therefore, an absolute must, especially for stop-loss orders.
If you are a short-term trader, you often have to deal with small moves in price to fill orders as close to the desired prices. To save yourself from a losing day, you should be able to close your position easily. Liquidity in stocks is very important for day traders.
If you have a low-risk appetite: This is a tricky phase. In such cases, you should ideally consider steering away from high volume stocks or liquid stocks as they may experience high volatility in price.
However, illiquid stocks may also make one anxious. Instead, you could possibly look for stocks that are liquid but also are medium-volatile. This may keep you at comfortable risk levels possible.
Intraday trading requires careful consideration of various factors, and choosing the right stocks to trade is crucial for success. Liquidity plays a significant role in executing trades swiftly and efficiently, while volatility offers potential profit opportunities. Remember to conduct thorough research, employ effective risk management strategies, and adapt to market conditions while engaging in intraday trading. With the right approach and careful selection of liquid stocks, traders can aim to maximise their intraday trading potential and achieve their financial goals. And for deeper analysis, #TickertapeHaiNa!
FAQs about the best liquidity stocks for intraday
What are liquid stocks for intraday trading?
Liquid stocks for intraday trading are those stocks that can be bought and sold quickly during the trading day due to their high trading volume and narrow bid-ask spreads, ensuring minimal impact on stock prices during transactions.
Why are high liquidity stocks preferred for intraday trading?
High liquidity stocks are preferred for intraday trading because they allow traders to enter and exit positions easily within the day, offering flexibility and reducing the risk of price slippage due to the high volume of trades.
What are the best 3 liquid stocks?
The top 3 liquid stocks are:
1. IRB Infrastructure Developers Ltd
2. NHPC Ltd
3. Vodafone Idea Ltd
Note that the list is dated 30th January 2024 and is for informational purposes only; it is essential to conduct your research.
Which are the most liquid stocks (NSE) for intraday trading?
The most liquid stocks on NSE (National Stock Exchange) for intraday trading often include large-cap stocks and well-known companies with consistent trading activity. Such stocks usually have high volumes and provide quick transactions.
How do I identify the best liquidity stocks for intraday trading?
To identify the best liquidity stocks for intraday trading, look for stocks with high trading volumes, narrow bid-ask spreads, and stable price movements. Monitoring market trends and analysing stock performance can also help in selection. However, before investing in high liquidity stocks, it is worthwhile to conduct thorough research.
Which company is best for intraday trading based on liquidity?
The best company for intraday trading varies based on current market conditions. However, companies in sectors with consistent demand and stability, like technology, finance, and consumer goods, often offer high liquidity stocks suitable for intraday trading. Conduct a thorough research before investing in any stock.