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What are Penny Stocks in India? High Risk, Explosive Returns!

An entire overview of Penny shares in India: Hi there Traders! Penny shares are the darlings of latest traders. The low market worth of those shares makes them fairly engaging to newbies. Nevertheless, there are a variety of issues that an investor ought to know earlier than investing in penny shares. On this submit, we’re going to focus on penny shares, their professionals and cons, and whether or not an investor should purchase it or not. Let’s get began.

What are Penny shares in India?

Penny shares are these shares that commerce at a really low market worth, usually with a share worth lower than Rs 10. These shares have a really low market capitalization and usually beneath Rs 500 crores.  Additional, penny shares within the Indian inventory market have low liquidity and are speculative in nature.

Being smaller than Small-cap corporations, these shares belong to the microcap class. Nevertheless, you’ll find various penny shares in India listed on each the Bombay inventory change (BSE) and the Nationwide inventory change (NSE).

Notice: If we glance into historical past, the time period Penny Shares got here from US markets.  In the US, penny shares was these shares who commerce beneath one greenback ($1) i.e. the inventory price pennies. Nevertheless, these days, even the shares buying and selling beneath two to 5 greenback are even thought-about penny shares there.

Listed below are a number of examples of penny shares in India (Supply: Trade Brains Screener):

Firm Trade Market Cap PE Ratio TTM Present Value ROE 3 Yr Debt/Fairness
Aditya Spinners Ltd. Textile – Spinning 10.03 Cr 4.2311 Rs 5.99 12.11 0.75
Advance Multitech Ltd. Rubber Merchandise 1.66 Cr 14.5906 Rs 4.08 6.73 0.59
Anupam Finserv Ltd. Finance – NBFC 8.89 Cr 16.5616 Rs 8.46 6.08 0.58
Ashirwad Capital Ltd. Finance – Funding 11.56 Cr 24.8069 Rs 2.89 11.63 0
Asian Fertilizers Ltd. Fertilizers 0.91 Cr 1.3112 Rs 1.15 6.79 0.64
ATV Tasks India Ltd. Engineering – Industrial Equipments 36.12 Cr 5.2401 Rs 6.80 8.66 0.35
AVI Polymers Ltd. Buying and selling 1.98 Cr 10.071 Rs 4.85 5.6 0
Baba Arts Ltd. Movie Manufacturing, Distribution & Leisure 52.45 Cr 19.5554 Rs 9.99 5.29 0
Balurghat Applied sciences Ltd. Logistics 14.56 Cr 22.1951 Rs 8.00 13.08 0.88
Basant Agro Tech (India) Ltd. Fertilizers 68.15 Cr 8.1278 Rs 7.52 6.14 0.48
Bervin Funding & Leasing Ltd. Finance – Funding 4.46 Cr 1.56 Rs 7.57 28.28 0.83
Beryl Securities Ltd. Finance – NBFC 2.60 Cr 7.9983 Rs 5.36 5.95 0
Capital Commerce Hyperlinks Ltd. Finance – NBFC 25.82 Cr 24.5419 Rs 4.79 7.01 0.03
Century Extrusions Ltd. Aluminium & Aluminium Merchandise 42.64 Cr 67.6825 Rs 5.33 8.54 0.85
CES Ltd. BPO/ITeS 29.78 Cr 3.0272 Rs 8.18 12.83 0.02
Chandni Machines Ltd. Retailing 2.01 Cr 3.8009 Rs 6.23 31.45 0.11
Company Courier & Cargo Ltd. Courier Providers 2.38 Cr 16.9714 Rs 3.30 30.96 0.01
Cybermate Infotek Ltd. IT – Software program 14.35 Cr 3.1045 Rs 1.45 15.02 0.05
Ekam Leasing & Finance Firm Ltd. Finance – NBFC 2.34 Cr 3.083 Rs 3.90 6.35 0.79
Enterprise Worldwide Ltd. Textile 2.54 Cr 3.3513 Rs 8.50 5.36 0.13
Gagan Gases Ltd. Industrial Gases & Fuels 3.16 Cr 35.1439 Rs 7.00 8.01 0.02
Golkonda Aluminium Extrusions Ltd. Aluminium & Aluminium Merchandise 1.60 Cr 18.1326 Rs 4.29 35.49 0
Gratex Industries Ltd. Paper & Paper Merchandise 2.73 Cr 29.369 Rs 9.00 5.96 0.05
GSL Securities Ltd. Finance – NBFC 1.43 Cr 38.6486 Rs 4.40 22.08 0
Haria Exports Ltd. Buying and selling 1.28 Cr 3.9448 Rs 1.11 6.53 0
Intellivate Capital Advisors Ltd. Miscellaneous 14.41 Cr 65.201 Rs 4.64 5.81 0
Interactive Monetary Providers Ltd. IT – Software program 2.72 Cr 13.0809 Rs 9.03 8.52 0
Jai Mata Glass Ltd. Glass 1.90 Cr 3.8076 Rs 0.19 10.4 0
JJ Finance Company Ltd. Finance – NBFC 1.68 Cr 14.1237 Rs 5.96 8.32 0
Kabsons Industries Ltd. Industrial Gases & Fuels 8.40 Cr 8.0534 Rs 4.81 23.2 0
Krishna Capital And Securities Ltd. Finance – NBFC 1.47 Cr 6.831 Rs 4.65 6.57 0
LKP Securities Ltd. Finance – Inventory Broking 56.93 Cr 7.7741 Rs 7.70 11.63 0.4
Modex Worldwide Securities Ltd. Finance – Inventory Broking 4.43 Cr 7.4295 Rs 3.69 5.15 0.46
Moongipa Capital Finance Ltd. Finance – NBFC 0.81 Cr 1.1402 Rs 2.65 9.72 0.07
NCC Blue Water Merchandise Ltd. Aquaculture 3.76 Cr 10.7701 Rs 4.85 30.06 0
NHC Meals Ltd. Client Meals 9.13 Cr 6.4511 Rs 7.70 5.06 0.94
North Japanese Carrying Company Ltd. Logistics 49.80 Cr 40.7161 Rs 9.92 5.86 0.83
NR Worldwide Ltd. Metal & Iron Merchandise 5.34 Cr 82.1107 Rs 5.00 6.21 0
One International Service Supplier Ltd. Textile 1.28 Cr 4.3351 Rs 1.80 5.58 0.06
Orient Tradelink Ltd. Movie Manufacturing, Distribution & Leisure 8.94 Cr 85.9276 Rs 1.63 5.83 0.23
Peeti Securities Ltd. Buying and selling 2.72 Cr 7.8477 Rs 7.24 12.51 0
Pervasive Commodities Ltd. Electrical Gear 0.09 Cr 18.2822 Rs 9.60 36.76 0.93
Pioneer Agro Extracts Ltd. Solvent Extraction 3.47 Cr 11.5144 Rs 8.00 23.7 0
RTCL Ltd. Building – Actual Property 5.90 Cr 36.2244 Rs 4.92 11 0.06
Sagar Productions Ltd. Finance – Funding 31.99 Cr 81.4078 Rs 7.97 13.75 0.01
Sakuma Exports Ltd. Buying and selling 160.67 Cr 18.2459 Rs 6.85 12.74 0.02
Salem Erode Investments Ltd. Finance – NBFC 2.17 Cr 9.8499 Rs 1.89 12.52 0
Sarthak Industries Ltd. Diversified 6.77 Cr 1.6676 Rs 9.72 5.03 0.01
Shailja Business Commerce Frenzy Ltd. Buying and selling 2.05 Cr 7.0806 Rs 6.32 22.18 0.05
Shyam Century Ferrous Ltd. Ferro & Silica Manganese 146.63 Cr 20.1365 Rs 6.60 6.67 0.02
Speedage Commercials Ltd. Buying and selling 0.93 Cr 2.6374 Rs 9.50 7.23 0
Sri Krishna Constructions (India) Ltd. Building – Actual Property 6.88 Cr 8.5255 Rs 6.57 9.1 0.24
Sugal & Damani Share Brokers Ltd. Finance – Inventory Broking 5.43 Cr 2.8463 Rs 8.68 14.94 0
Tremendous Bakers (India) Ltd. Client Meals 1.94 Cr 8.9809 Rs 6.42 6.24 0
Surana Telecom & Energy Ltd. Cable 75.48 Cr 15.841 Rs 5.56 5.18 0.35
Surat Textile Mills Ltd. Textile – Artifical Fibres 100.13 Cr 19.2712 Rs 4.51 8.12 0
Swasti Vinayaka Artwork & Heritage Company Ltd. Miscellaneous 17.60 Cr 27.7603 Rs 4.40 22.07 0.64
Syncom Formulations (India) Ltd. Prescribed drugs & Medicine 306.80 Cr 15.9723 Rs 3.93 8.76 0.01
Talwalkars Higher Worth Health Ltd. Miscellaneous 6.82 Cr 2.799 Rs 2.20 7.99 0.83
Tirupati Sarjan Ltd. Building – Actual Property 27.11 Cr 18.6328 Rs 8.24 6.92 0.66
Umiya Tubes Ltd. Metal & Iron Merchandise 8.27 Cr 98.3989 Rs 8.26 6.68 0.25
Uniply Industries Ltd. Wooden & Wooden Merchandise 72.59 Cr 3.4686 Rs 4.33 8.04 0.22
Unjha Formulations Ltd. Prescribed drugs & Medicine 4.05 Cr 25.6069 Rs 9.03 24.65 0
Viji Finance Ltd. Finance – NBFC 6.43 Cr 90.6338 Rs 0.78 6.41 0.36
Vikas Proppant & Granite Ltd. Chemical compounds 179.11 Cr 30.6428 Rs 3.48 11.11 0.29

PROS of Penny shares in India

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Penny shares have a excessive potential of rewarding its shareholder. The returns are fairly excessive if you’ll be able to get a great penny inventory. Many penny shares have turned out to be multi-baggers for his or her traders.

These shares are capable of make explosive strikes. There are a variety of penny shares which have given a number of occasions returns in just some months. Furthermore, as a result of low market worth of those shares, traders are capable of purchase massive portions of penny shares.

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Typically, penny shares aren’t identified to many as retail traders should not have details about these shares, and institutional traders don’t put money into these corporations due to their low market capitalization. Subsequently, if you’ll be able to discover one such inventory earlier than the market does, then it might probably grow to be an awesome wealth creator for you.

Additionally learn: How To Invest Rs 10,000 In India for High Returns?

CONS of Penny shares in India

The cons record of penny shares is just too massive in comparison with its professionals. Listed below are a number of of the frequent disadvantages of shopping for penny shares:

  1. Excessive Threat: These shares are fairly dangerous as the proportion of various penny shares outperforming the market is kind of much less. Most of the penny shares develop into bankrupt and exit of enterprise.
  2. These shares have very low liquidity. Subsequently there will likely be troubles on each ends of transactions i.e. shopping for and promoting. Whereas shopping for these shares, you won’t have the ability to discover a vendor. In case you acquire the inventory, and the inventory worth begins falling, you then received’t have the ability to discover a purchaser to promote the inventory.
  3. There’s a massive bid-ask unfold in these shares.
  4. Restricted data is out there to the general public concerning the firm.
  5. Value manipulations: There have been various instances of worth manipulations in penny shares the place the insiders attempt to inflate the share worth. Additional, one can simply manipulate the penny shares by shopping for massive portions of those shares.
  6. Sudden delisting and regulatory scrutiny: There are a number of instances the place penny shares have been delisted from the inventory exchanges. Additional, these shares are commonly beneath scrutiny by SEBI.
  7. Vulnerable to scams: There are a variety of previous scams in penny shares (Ex- pump and dump).

Associated submit: Market Capitalization Basics: Large cap, Mid cap & Small cap companies

Who should purchase penny shares?

Penny shares are appropriate for these traders who’re able to take excessive dangers in expectations to get excessive returns. In case you have a low-risk urge for food, don’t put money into these shares.

Guidelines for investing in Penny shares in India

Listed below are a number of pointers that may enable you to put money into penny shares.

  1. Search for worth, not simply the worth: Even for penny shares, you could have a look at the worth the corporate is giving. Perceive the corporate’s enterprise, product, providers, and many others. Investing in penny inventory is just not shopping for a lottery ticket.
  2. Research the corporate’s fundamentals: Have a look at the corporate’s financials, administration, debt, development fee, and many others
  3. Test the liquidity: Purchase shares which have moderately excessive buying and selling volumes so that there’s ample liquidity.
  4. Promoter’s share and pledge: Test the promoter’s shareholding patterns and inventory pledge if any.
  5. Technical elements: If you recognize technical evaluation, then additionally examine the penny inventory’s technicals. Furthermore, if you happen to’re buying penny shares only for fast returns, don’t ignore wanting into elements like momentum, technical indicators like shifting averages, RSI, and many others.
  6. Make investments solely a small portion of your funding in penny shares: As these shares have a excessive danger, it is best to solely make investments a small quantity, lower than 10% of your complete funding quantity in penny shares.
  7. Monitor repeatedly: Penny shares are very risky. As these shares are identified to make explosive strikes, due to this fact monitor these shares repeatedly. If the shares are performing effectively, purchase extra. If they’re repeatedly performing poorly, eliminate it.
  8. Don’t diversify: As you’re solely investing a small proportion of the quantity in these shares, diversifying will make the web funding even smaller. Choose solely 2 or 3 penny shares and put money into them.
  9. Be disciplined: Don’t make investments all in in case your penny shares begin performing tremendously good. Equally, don’t give up if one or two of your penny shares failed to provide passable returns.
  10. Don’t consider the ‘It can not go down any additional’ delusion. If the costs of the inventory are falling, attempt to discover the explanation behind it.

Conclusion

Whereas there are a variety of peoples who’ve created big wealth by investing in penny shares, nonetheless for a lot of penny shares are wealth destroyers. If you’ll put money into penny shares, do your analysis rigorously and don’t speculate concerning the inventory. Furthermore, there are excessive dangers concerned in these shares. So, be prepared for it.

Lastly, right here’s a brief video to summarize what are penny shares in India and find out how to analysis and analyze them.

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Additionally learn: How to Invest in Share Market? A Beginner’s guide

That’s all for right now on penny shares. I hope this submit was helpful to you. In case you have any doubts/queries, be happy to remark beneath. I’ll be glad to assist. Joyful Investing and Buying and selling. Take care!

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