Illiquid or Thinly Traded Listed Shares

What Is Illiquid Stock Or Unquoted Share?

Illiquid Stocks are shares that are listed on a stock exchange but are not frequently traded. These shares may belong to small or micro-cap companies that are not popular among investors or are in sectors that are not in the spotlight. Investing in illiquid shares or unquoted shares can offer potential rewards, but it comes with its own set of risks.

Unquoted Shares Price List In India

Our Unquoted shares list is also an excellent resource if you are looking to invest in unquoted shares.

Liquid Stocks vs Illiquid Stocks

Trading Volume: One of the main differences between illiquid and liquid shares is trading volume. Liquid shares have higher trading volumes, meaning a large number of shares are bought and sold regularly. In contrast, illiquid shares tend to have lower trading volumes, with fewer shares changing hands on a daily basis.
Market Depth: Market depth refers to the number of buy and sell orders at various price levels. Liquid shares generally have deeper market depth, with multiple orders available at different price points, allowing easier execution of trades. Illiquid shares have shallower market depth, meaning fewer orders are available at varying price levels, making execution more difficult.
Price Volatility: Price volatility is the degree of fluctuation in share prices. Liquid shares are usually less volatile due to higher trading volume and market depth, which help absorb large buy and sell orders, keeping prices relatively stable. Illiquid shares tend to be more volatile due to lower trading volume and market depth, causing prices to fluctuate more sharply when large orders are placed.
Bid–Ask Spread: The bid–ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a share. Liquid shares typically have a narrower spread, making them easier for investors to trade at desired prices. Illiquid shares usually have wider spreads, increasing transaction costs and making it harder to find suitable counterparties.
Ease of Transactions: Liquid shares are easier to buy and sell quickly due to higher volume, deeper market depth, and narrower bid–ask spreads. Illiquid shares can take longer to trade and may lead to unfavourable prices because of limited market depth and wider spreads.

Advantages of Investing in Illiquid Stock

Undervalued Opportunities: Illiquid stocks are often overlooked by the market and may trade below their intrinsic value, offering attractive opportunities for diligent investors.
Potential for Higher Returns: They can sometimes deliver higher returns than popular, frequently traded stocks due to their undervaluation and growth potential.
Diversification Benefits: Unquoted shares can add diversification to an investment portfolio, as they may not be directly correlated to more popular equities.
Improved Liquidity Compared to Unlisted Shares: Although unquoted shares are not traded frequently, they are still listed on a stock exchange, making them more liquid than unlisted shares.
Regulatory Oversight: Even unquoted shares must comply with stock exchange rules and regulations, ensuring transparency and governance.

Disadvantages of Investing in Illiquid Stock

Limited Liquidity: These shares may be hard to buy or sell quickly, potentially leading to price volatility.
Lack of Analyst Coverage: Illiquid stocks often receive less coverage from analysts and financial media, making it harder to obtain reliable information.
Higher Risk: They may be riskier due to market fluctuations and external factors.
Smaller Market Capitalisation: Many companies with illiquid shares are smaller in size and more vulnerable to adverse market conditions.
Lack of Dividends: Some companies reinvest profits into the business instead of paying dividends.