Penny Stock

Penny Stocks


Introduction


 Penny stocks are stocks that trade at very low prices normally below 50 rupees. They have low market capitalization and mostly are illiquid. Penny stocks are lesser-known to the larger investing public. I Investors remain away from them because the information regarding their fundamentals and businesses is either not reliable or not available. However, penny stocks are known for generating multi-bagger returns within a few trading sessions. Since penny stocks are illiquid, sometimes only a few orders can lead to hitting circuit limit on the exchange. These stocks mostly give higher returns when they are hitting upper circuits for a number of days.


Generally, this period of hitting circuits is not accompanied with trading volumes. Sometimes there is a strong fundamental story that moves the stock up. Other times it might just be a case of manipulation by stock operators. They artificially inflate the price and volumes to attract innocent retail investors. Once they have enough traders participating in the stocks they would offload their own holdings. Now that we have understood the modus operandi of penny stocks. lets see why are penny stocks called “Penny” Stocks

Penny Stocks are Called Penny Stocks for a Reason!

Penny stocks trade at such low rates for a reason because most of the traders buying penny stocks don’t even care about them and look to exit sooner or later once they have given recent returns. Penny stocks in India often don’t comply with exchange regulations. They are not even transparent in their reporting. It is only when there is some news or some turnaround stories on penny stocks, that they move. The speculation leads to an increase in trading volumes and prices soar. But very few of them turn out to be true or genuinely strong on a fundamental basis. Any negative news causes the price to turn south.

Things to keep in mind while buying penny stocks.

The risk that a penny stock will go bust is equally high. The company can suddenly shut down or there can be very little probability of giving multi-bagger returns. The total capital that deserves to be invested in penny stocks should not be more than 2 to 3 percent of a person’s portfolio value. Investing in penny stocks is mostly speculative. First of all, investors should avoid investing in them and if they buy any it should be treated as buying a lottery. You should never become emotionally attached to them in the hope of some good news. Investors should also never follow a buy and hold approach even if they have got good returns recently. Because over a period of time neither they are able to generate value for shareholders nor they follow a transparent reporting system.


Investors should also research extensively about the stock and the news going on in the public domain and not become the victim of operators’ conspiracy, who later offload their holdings after manipulating the price. The transaction cost for some penny stocks is also higher and on some the brokerage is charged on a per-share basis. Similarly when stocks trade at a very low price, the spread between the bid and ask price also turn out to be significant in terms of percentage. The stocks mentioned in the watchlist have been determined after keeping in mind news, speculation, trend in their price chart, and a few fundamental factors such as debt to equity ratio and cashflows. But this information will vary on a day to day basis depending on the newsflow and an investor should make some relevant background checks in his capacity before investing in these stocks.

Why invest in penny stock?

The price of penny stock can be more volatile than other shares. There is no assurance that they will give good returns on investment. The value of penny stocks may go down without any warning. If you want to invest in penny stocks, then follow the rule of "Don't put all eggs in one basket". Penny stocks are characterised by high volatility in prices and do not have any formal listing on the exchange. Penny stocks usually carry high risks when it comes to investment, especially when trading them online. Penny stocks are considered shares of low value traded on over-the-counter bulletin boards. Unlike regular trading, investors do not buy these securities from the company itself but brokers or dealers. These dealers make a profit by marking up the price of the stock they are selling to you. Thus, they are also known as 'marketers'. 

Best Penny Stocks To Buy: Find the Best Ones To Watch:
  1. 5 Penny Stocks To Keep on Your Watchlist. Last year was great for the penny stock market. ...
  2. Pitney Bowes (NYSE: PBI) ...
  3. Sesen Bio (NASDAQ: SESN) ...
  4. Bolt Biotherapeutics (NASDAQ: BOLT) ...
  5. AgroFresh Solutions Inc. ...
  6. Pixelworks Inc.

Which is popular penny stocks in india?

  • 2408.70-7.20% Wipro422.001.43% ONGC131.05-13.53% NTPC140.65-1.57%
  • High Dividend Yield. Castrol India. Phillips Carbon. Schaeffler India.
  • Saregama India360.70-0.35% Tata Investment1338.95-0.24% Sonata Software662.35-1.06%
  • Coal India Ltd183.25-1.27%

 Following Top company example of penny stock.


Company NameBSE Scrip CodeNSE SymbolCMP (Rs.) 10 June 2022Rating
(Stars)		Industry

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