Big stock movers of past year have brought fat returns

Capitalizing on intra-day volatility requires a disciplined approach to mitigate losses if caught in a wrong trade. (Image: Pixapay)
Capitalizing on intra-day volatility requires a disciplined approach to mitigate losses if caught in a wrong trade. (Image: Pixapay)

Summary

  • In the past year, certain stocks have shown remarkable daily fluctuations, leading to hefty returns for savvy investors. Here's an analysis of these top movers and their impressive performance

Day trading often draws significant interest from investors, despite many experiencing losses.

Mint analysed Nifty 100 companies to find the stocks with the highest intra-day movement over the past 12 months up to April. The top stock, Indian Railway Finance Corp (IRFC), showed an average daily movement of 4.7% during this period.

To put this in perspective, if an investor had invested 10 lakh at IRFC's lowest price each day and sold at the highest price (or short-sold at the highest price and bought back at the lowest), they could have made 1.17 crore in a year. Even capturing 20% of these gains would yield an annual return of over 200%.

Intra-day movement is calculated as the difference between the daily high and low prices, divided by the low price. The annual average is the simple average of these daily movements over the period. This differs from volatility, which involves more complex calculations.

Read This: Why are infra and capital-goods stocks in demand despite premium valuations?

As per the analysis, after IRFC, shares of Adani Power and Adani Energy Solutions had the most significant movements, at 4.2% and 4.1%, respectively. Adani group companies dominated the list, comprising three of the top five and five of the top ten companies. These stocks often moved more than 10%, with peaks up to 23% on some days.

For instance, IRFC saw movements exceeding 10% in 21 sessions during the year, while Adani Enterprises did so in 20 sessions. In total, 62 sessions, or nearly one in four, had at least one stock moving more than 10%, offering substantial opportunities for risk-takers.

Interestingly, companies in the energy sector, including renewables, and non-bank finance companies (NBFCs), made up seven of the ten stocks with the highest intra-day movements. This marks a significant shift from earlier boom periods when real estate companies showed the most volatility.

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On the other hand, fast moving consumer goods (FMCG) companies and banks accounted for six of the ten stocks with the lowest intra-day movements.

The data also indicates that stocks with sharper intra-day movements tend to yield better returns, supporting the theory that higher-risk stocks generate higher absolute returns.

Except for Adani Energy Solutions, the top four stocks generated one-year returns ranging from 89% to 394%. At the other end of the spectrum were Hindustan Unilever Ltd (HUL), HDFC Bank, Reliance Industries (RIL), ICICI Bank, and Tata Consultancy Services (TCS), which showed average daily movements of less than 1.6%.

These five stocks also generated relatively low absolute returns. For context, HDFC Bank and HUL shares each fell by nearly 10% over the past year. On the other hand, shares of TCS, ICICI Bank and RIL have gained 19%, 26% and 33%, respectively.

To be sure, while this analysis identifies stocks with significant intra-day movements, it's important to note that past performance may not predict future results. Additionally, capitalizing on intra-day volatility requires a disciplined approach to mitigate losses if caught in a wrong trade.

Also Read: April was calm for markets, but don't let that fool you

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