Stock market became “volatile” during early days of the COVID-19 pandemic. Market was again volatile, to a lesser degree, during domestic and overseas elections. Stock market volatility measures of how much of the value overall value of the stock market fluctuates up and down. Apart from this, individual stocks are sometimes considered volatile too. More specifically, investors can relate and calculate volatility just by looking at how much a stock price varies from the average price. Standard deviation, a statistical measure, is most commonly used for representing volatility. Investors who are buying stocks in current volatile market conditions should make sure that they enter by keeping long-term perspective in mind.
Stock market volatility can be seen at the time when external events result in significant uncertainty. For example, the major stock indexes which don’t move by over ~1% in a single day, these were seen falling by more than 5% each day when the global economy was struck by COVID-19 pandemic. At that time, no one had any idea what was going to happen. As a result of this, uncertainty resulted in frantic buying and selling. Therefore, if you are buying stocks in current volatile market conditions, make sure to invest in some of the blue-chip companies. This is because such companies are much more stable and they might not make very big price swings.
With this thought in mind, this article will help you make an informed decision if you are buying stocks in current volatile market conditions.
1. Reliance Industries Limited
The company evolved from being a textiles and polyester company to integrated player throughout energy, materials, retail, entertainment and digital services.
The company has released its 1Q24 results, and it saw gross revenue coming at INR231,132 crore ($28.2 billion), exhibiting a fall of 4.7% year-over-year because of sharp decline in O2C revenues with 31% decline in crude oil prices. However, this was partially offset by strong growth in consumer businesses and higher volumes from O2C and Oil & Gas business.
EBITDA of the company went up by ~5.1% year-over-year to INR41,982 crore ($5.1 billion). This growth was led by consumer and upstream businesses, which offset fall in O2C earnings. O2C earnings were lower as a result of sharp decline in fuel cracks from exceptionally higher levels in 1Q23. Higher subscriber base and customer engagement supported revenue and profitability growth for Digital Services. Retail earnings saw expansion of footprint and improved profitability with operating leverage. Increased production and realizations led to growth in Oil & Gas EBITDA.
Profit for the period fell 5.9% year-over-year to INR18,258 crore ($2.2 billion) as a result of higher finance cost and depreciation.
2. AU Small Finance Bank
AU Small Finance Bank Limited is an Indian small finance bank, which is based out of Jaipur.
AU Small Finance Bank Limited released financial results for the quarter ended June 30, 2023.
In 1Q24, the bank saw gradual improvement in inflationary pressures, while there was some resilience in macro-economic indicators. Domestic liquidity saw marginal improvement, however, interest rates remained elevated. Against this backdrop, the bank delivered consistent performance throughout business parameters which led to a steady start for FY24.
Despite of the fact that 1Q is a seasonally weak quarter for banking, it saw growth throughout its assets and deposits as profitability grew by ~44% on a year-over-year basis, which was supported by a strong NII growth of 28% year-over-year.
Bank’s asset quality saw an improvement on year-over-year basis, with GNPA coming at 1.76% in 1Q24 vs 1.96% in 1Q23. On the quarter-over-quarter basis, GNPA grew by 10 bps from 1.66% as on 4Q23. Total deposits went up by ~27% year-over-year to INR69,315 crore in comparison to INR54,631 crore in 1Q23. Current account deposits grew 47% year-over-year in 1Q24 whereas savings account deposits went up by ~11% year-over-year.
Going forward, the focus of the bank will be on sustainable growth, aiming to improve its balance sheet size. While it plans to penetrate deeper into rural India, the focus is to reach where significant unbanked population resides.
3. Tata Power Company Limited
The company has been categorised as one of India’s largest integrated power companies and, together with its subsidiaries and jointly controlled entities, it has an installed/managed capacity of 14,339 MW.
Tata Power Renewable Energy Limited, which is a subsidiary of The Tata Power Company Limited, plans to set up a 41 MW captive solar plant at Thoothukudi, Tamil Nadu for TP Solar Limited new greenfield 4.3 GW solar cell and module manufacturing facility which is located at Tirunelveli, Tamil Nadu. The captive plant should help in generating 101 million units of electricity and offset ~72,000 metric tonnes of CO2 emissions annually.
The company saw growth of 29% in 1Q24 with net profit coming at INR1,141 crore. It saw net profit growth for 15th consecutive quarter (year-over-year), with strong growth in consolidated revenue and EBITDA. Its consolidated revenue for reporting quarter came in at INR15,003 crore, and EBITDA went up by ~43% to INR3,005 crore. The company’s strong financial performance was because of sustained business growth throughout all the clusters. Performance of the company exhibits its effective strategies, operational efficiencies, and execution excellence.
The company should be able to develop round the clock renewable power solutions. It continues to make significant progress in developing solutions around battery storage and pumped hydro projects. This should support RE100 agenda of large enterprises and also contribute in clean energy solutions for the company’s C&I consumers.
Conclusion
Buying stocks in current volatile market conditions can be tedious task as even blue-chip companies are seeing some headwinds, which continues to impact their stock prices. However, this impact will be short-term in nature and the above companies are expected to rebound at a rapid pace when the recovery starts.
At the time of buying stocks in current volatile market conditions, the above should be on the priority list of the investors as these stocks have strong financial risk profile, stable market share and healthy track record.
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