Best Short-Term Stocks to Buy in India

6 Aug 2024 , 07:12 PM

A useful strategy for those who want to focus on immediate market movements and make quick money is to deal with short-term stocks. Financial technologies provide traders with various tools and platforms, which can be used for the timely analysis of market movements, particularly in combination with stock performance data, company reports, and numerous financial indicators.

Obviously, in addition to its profit-making potential, short-term investing implies higher risks and calls for continuous adjustments, precise timing, and research.

Top Short-Term Stocks to Buy in 2024

Here are the best short-term stocks to consider buying –

Name of Stock	Sub-Sector
Reliance Industries Limited	Retail, Energy
Bajaj Auto Ltd	Bikes and Scooters
Siemens Ltd	Conglomerates
Maruti Suzuki India Limited	Automotive
ABB India Ltd	Heavy Electrical Products
Hero MotoCorp Ltd	Bikes and Scooters
Polycab India Ltd	Electrical Equipment
ICICI Bank	Banking

Overview of the Top Short-Term Stocks to Buy in 2024

Let’s take a detailed look at the best short-term stocks in 2024 –

1. Reliance Industries Limited

From a 2024 perspective, Reliance Industries Limited can be identified as a strong contender for short term stocks to buy. One of the company’s key assets is its readiness to change and apply innovative approaches. For instance, the fact that RIL has developed a very successful venture, Jio, which has enabled it to become one of the leading giants in the telecom industry, is quite impressive.

However, large-scale investments in green energy are probably even more impressive, considering that they will be pretty beneficial considering recent global trends. With sufficient financial resources, the company is more likely to find and support new profitable ventures.

2. Bajaj Auto Ltd

One of the leading entities under the Bajaj Group umbrella, Bajaj Auto Ltd is one of India’s premier manufacturers of two- and three-wheelers. Its broad spectrum of products, including motorcycles, commercial vehicles, and electric two-wheelers, is one of the most comprehensive on the market.

Previously, it went by the name M/S Bachraj Trading Corporation Limited, after later becoming a public company in 1960. Its history, as well as the landmark event of the release of the Vespa 150 under a licence from the Italy-based Piaggio, proves its long-standing presence in the market and the potential for short-term investment benefits.

3. Siemens Ltd

Siemens Ltd is a critical player in the technology sector, focusing on industry, infrastructure, and digital transformation. As a subsidiary of Siemens AG, this company delivers solutions across manufacturing, intelligent infrastructure, and clean power generation.

Siemens Ltd also addresses the transmission and distribution of electrical energy and advanced transportation systems. Its commitment to innovation and sustainability makes it a compelling option for investors seeking short-term stocks to buy in a dynamic technological landscape.

4. Maruti Suzuki India Limited 

It is the biggest car manufacturer in India, with a high market share and a strong brand image. This company will benefit from the growth of opportunities in the automotive sector in general and from Maruti Suzuki’s plans to launch new models in specific. Moreover, due to its long-time presence in the market and strong operations strategy, Maruti Suzuki offers the best stocks to buy for the short term.

5. ABB India Ltd

ABB India Ltd is a key player in the pharmaceuticals sphere. The company’s product range is relatively comprehensive and includes diagnostics, medical devices, nutrition, and branded generic drugs.

The business deals with diverse therapeutic fields such as women’s health or gastroenterology. Product products such as Colospa or Ganaton illustrate short-term growth capacity and market potential.

7. Hero MotoCorp Ltd

Hero Motocorp Ltd. is the world’s largest manufacturer of two-wheelers, producing around 9.5 million units annually, so its manufacturing capabilities may be deemed vast. Hero MotoCorp has numerous production facilities in India, Columbia, and Bangladesh.

Due to the partnership between Honda Motor Co. Ltd and Hero Cycles, the company was integrated in 1985 by launching the CD 100 motorcycle. Its production capacity makes it appropriate for investors looking for short-term stocks to buy.

9. Polycab India Ltd

There are some reasons for Polycab India Ltd to be considered as a viable option for a short-term investment. It is a well-known manufacturer of wires, cables, and other electrical products that meet various infrastructure needs and are of good quality.

The company demonstrates good results because of statistical indicators like market capitalisation of Rs. 84,739.06 crore and significant growth in revenue and EPS. The return versus Nifty is relatively high, and Polycab India Ltd can be a surprise as a promising short-term investment.

10. ICICI Bank 

It is one of the leading private-sector banks in India. This organisation continuously demonstrates stable financial performance and uses technological advancements to improve customer satisfaction.

Moreover, it is expected that the Indian economy will start to recover, the bank will benefit from its digital initiatives, and a good risk management strategy will improve its position in 2024. In addition, the organisation’s leading position in the market and wide range of products also make it a good short-term investment.

What are Short-Term Stocks?

Short-term stock is a stock that is acquired and held for one year or less. These are the stocks in which investors typically profit from immediate market trends for price volatility or to play for short-term gains on quarterly earnings reports and/or market-related events. Long-term investments are those investments where you plan to invest for years and gain better profits. On the other hand, short-term stock trading is just about getting quick returns.

These strategies are generally more actively managed than buy and hold, requiring investors to closely watch the market and how the individual investments are performing to make optimal buying and selling decisions. Losses are also likely to happen because of the instability of the market.

As a result, these are more appropriate for those with good risk tolerance and knowledge of investing in the markets. Short-term investing demands a lot of research, quick decision-making, and, most times, a willingness to withstand that extra bit of market volatility that also gives you that extra zing.

Kinds of Short-Term Stocks to Consider

It includes some financial instruments you can invest for the short term with different risks and returns. These could be treasury bills, equity shares, certificates of deposit and commercial papers. They each have their unique characteristics and advantages to help you invest differently.

• Treasury Bills: They are short-term, zero-coupon, fixed-income securities issued at a discount to their par value and mature in a few days to one year. When bought and later redeemed at maturity, those who invest in them profit due to the difference. T-bills are considered sovereign and, therefore, one of the safest investments. These provide low returns but are suitable for those who wish to protect their capital while taking minimal risk.
• Equity Shares: Equity shares denote an ownership interest in the company and consequently entitle the holder to a part of the profit the company can generate, which takes the form of dividends. Short-term investments are usually about picking the right equity shares in popular companies experiencing a rapid growth phase or expanding market. Although these can give returns, they can also project higher volatility and risk. Short-term equity investment requires active trading and study on the market.
• Certificates of Deposit: These are time deposits offered by banks that impose a penalty if you withdraw the funds before maturity, which varies from a few months to several years. The terms on short-term CDs are generally one year or less. They offer fixed interest rates for predictable rates of return. Meanwhile, while low-risk and FDIC-insured up to a certain limit, these are meant for people who want a predictable return without stock market kind of ups and downs (keep in mind, they’re not low risk as in no risk).
• Commercial Papers: These are the unsecured short-term debt instruments the corporation issues to finance operational needs such as payroll and inventory. Their terms last less than 270 days. They pay more than T-Bills and CDs but are riskier since they have no collateral. Credit risk could be another source of danger, so commercial paper investors must assess the issuing company’s creditworthiness.

Factors to Consider Before Investing in Short-Term Stocks in India

• Company Fundamentals and Growth Prospects: Before looking for the best stocks to buy for short term, you must know the fundamentals of the company and its growth prospects. Assess the company’s fiscal state and review its revenues, profit margins, and debt ratios. Look at the competitive advantages and management track record. Strong business models and growth prospects spill over to lucrative short-term opportunities that breed trading profits.
• Immediate Market Catalysts: Find catalysts that could move stock prices over the short term. These can range from reports on earnings, product releases, mergers and acquisitions, regulatory modifications, or news about macroeconomic trends. These factors are essential in better predicting the direction of stocks and facilitating the right purchase or sale decision. Keeping up with news and changes to the stock is necessary for short-term trading success.
• Technical Analysis: To put it simply, technical research refers to evaluating the stock price charts and the trading volumes to understand patterns and trends. Moving averages, relative strength index, and candlestick patterns are commonly used. Analysing historical price movements allows the investor to guess future price movements. People looking for short-term stocks to buy need to know two things – where to enter and where to exit. This tool helps you with both.
• Risk Management Strategies: In short-term trading, it is essential to use risk control, which can help to save your capital. However, stop-loss orders should be used to reduce the maximum loss and position sizing to control how much capital is at risk on each trade. Spread your risk and diversify your portfolio across stocks and sectors. Adjust your risk management strategies such that they should be regularly evaluated based on market conditions.
• Trading Costs and Liquidity: Factoring in your trading cost & market liquidity on your returns can cut your profits, so go with a broker that has low fees. Also, ensure you are buying into stocks with enough traded volume. This reduces the risk of a situation where you cannot exit a position fast.
• Investment Goals: Ensure you know how much risk you can take and what your comprehensive objectives are before becoming a short-term stock trader. Short-term trading can be more volatile if you have a lower risk tolerance than long-term investing. This means establishing what you are trying to accomplish with your money, be it earning some quick cash via day or swing trading or simply managing to keep above water and create a base for more significant future investments.

Benefits of Investing in Short-Term Stocks in India

The advantages of short-term stock investing are as follows –

1. Rapid Profit Potential

With short-term stocks, one of the advantages is that you can earn a quick profit from investment. Long-term investments can take decades to turn a profit. Short-term stocks only need a few days to months to make significant gains. This opportunity appeals to investors who want to profit from market volatility and news events. The investors can identify these opportunities and capitalise on them in a fast turnaround.

2. Investment Flexibility

Stock trading is inherently very flexible over the short term. Investors are not locked into long holding periods and can swiftly adjust their strategies with respect to the market environment and their financial goals. This flexibility enables investors to react to market trends, quickly change sectors, capitalise on short-term opportunities, etc. Moreover, it allows capital to be redirected to better prospective investment opportunities without the barriers of a long-term commitment.

3. High Liquidity

The best stocks to buy for short term provide high liquidity. It is easy for these stocks to be bought or sold without much price change. This can be very useful in market volatility as it helps you execute trades without loss and lock in profits. This is critical as it allows the investor to actively manage their portfolio. Hence, holdings can be altered based on the market’s present conditions.

4. Enhanced Diversification

Though investing in individual stocks, rather than funds or ETFs, is absolutely not essential, especially in the short term, such a strategy could add a bit extra diversity to your overall portfolio. Long-term investments are great for being safer; however, short-term stocks are beneficial when there are opportunities for a faster profit, offsetting the portfolio’s general risk and reward profile.

By including a combination of varying degrees of short- and long-term investments, investors create greater diversification that lowers the risk of the method and can boost returns in different market situations.

How to Identify the Best Stocks for Short-Term Gains

Let’s see how you can identify the top stocks for the best gains –

1. Comprehensive Market Analysis

You should start with a complete market analysis to know about the most volatile stocks for maximum short-term profits. Analyse the market trends in general, the indicators, and the performance of the sectors to give a sense of where the market momentum may head.

Assess macroeconomic variables like interest rates, inflation, and GDP growth responsible for market sentiment and stock performance. This helps you determine which sectors or areas within those markets are likely to do well before you start looking for short-term stocks to buy.

2. Capitalising on Event-Driven Opportunities

Event-driven opportunities arise from specific events or announcements that can significantly impact a stock’s price in the short term. These include earnings reports, product launches, regulatory changes, mergers and acquisitions, and other corporate announcements. Monitor financial news and company press releases to stay informed about such events.

Stocks likely to benefit from positive developments or recover from temporary setbacks can offer lucrative short-term gains. Analysing the potential impact of these events helps in making timely investment decisions.

3. Utilising Technical Analysis

Technical analysis involves examining historical price movements and trading volumes to forecast future stock behaviour. Utilise tools and indicators such as moving averages, Bollinger Bands, relative strength index (RSI), and MACD to identify trends, support and resistance levels, and momentum. Chart patterns like head and shoulders, double tops and bottoms, and cup and handle can also provide insights into potential price movements.

Understanding these technical indicators and patterns enables you to make informed decisions about the best entry and exit points for your short-term trades. Regularly updating your technical analysis can help you adapt to changing market conditions, enhancing your ability to capitalise on short-term opportunities.

Risks of Investing in Short-Term Stocks for Gains

• Liquidity Challenges: Liquidity risk arises when a stock has insufficient trading volume, making it difficult to buy or sell shares quickly without affecting the stock price. For short-term investors, this can result in the inability to execute trades at desired prices, potentially leading to losses or missed opportunities.
• Precision in Timing and Execution: Successful short-term investing requires precise timing and execution. Misjudging the right moment to enter or exit a position can significantly impact returns. Market timing is notoriously difficult, and even experienced traders can struggle to consistently make profitable decisions in the short term.
• Risks of Over-Leveraging: Over-leveraging occurs when investors use borrowed funds to increase their investment positions. In a volatile market, over-leveraged positions can quickly lead to substantial financial losses, making it a risky strategy for short-term investors.
• High Market Volatility: Investing in short-term stocks is risky due to high market volatility. Stock prices fluctuate rapidly based on market news, economic indicators, or investor sentiment, leading to potential losses. This volatility can be challenging to predict and manage, making short-term investments susceptible to abrupt market movements.
• Insufficient Information: Short-term investors often have limited information to base their decisions on, as they focus on quick market movements rather than long-term fundamentals. This reliance on short-term data and trends can lead to uninformed or speculative trades, increasing the risk of losses.
• Regulatory and Political Uncertainty: Regulatory and political risk is another factor that can affect short-term investments. Changes in government policies, regulations, or political events can have immediate and significant impacts on stock prices. Investors must stay informed about potential regulatory changes and political developments to manage this risk effectively.

Wrapping Up

While short-term stock investing offers rapid profit potential and investment flexibility, it also demands a higher risk tolerance and precise execution. By balancing short-term opportunities with robust risk management, investors can navigate market volatility and achieve their financial objectives.

FAQs on Short-term Stocks to Buy

1. What are short-term stocks?

Short-term stocks are investments that are for typically less than a year. Investors aim to profit from quick market movements, leveraging price volatility, quarterly earnings, or significant market events. This strategy demands active management and swift decision-making.

2. What role do company fundamentals play in short-term investments?

Company fundamentals, such as financial health, profit margins, and growth prospects, are vital in short-term investments. Strong fundamentals indicate stability and potential for rapid growth, enhancing the likelihood of achieving profitable short-term gains.

3. How does technical analysis help in short-term trading?

Technical analysis aids short-term trading by examining historical price movements and trading volumes. Tools like moving averages, RSI, and candlestick patterns help identify trends and forecast future price directions, enabling traders to determine optimal entry and exit points for their investments.

4. What is the main risk of short-term stock investing?

The primary risk of short-term stock investing is high market volatility. Stock prices can fluctuate rapidly due to news, economic indicators, or investor sentiment, making it challenging to predict and manage, potentially leading to significant losses.

5. How necessary is liquidity in short-term investing?

High liquidity is crucial in short-term investments, allowing investors to quickly buy or sell shares without causing significant price changes. This ensures the ability to swiftly enter or exit positions, protecting against losses and securing gains in volatile markets.