By Sanjeev Sharma
New Delhi, Jan 10: Some penny stocks or low-priced stocks have given massive returns in the past 18 months with 102 stocks rising over 1000 per cent and 10 stocks rising over 5000 per cent.
The misfeasance is now widespread and IANS has been throwing into stark relief how circular trading and pump and dump schemes are being run brazenly. It is high time that SEBI and the two exchanges start looking at the data and improve their surveillance mechanisms.
As per data by BP Wealth, Equipp Social Impact Technologies rose by a whopping 29385 per cent, Simplex Papers by 14479 per cent, TTI Enterprise by 13335 per cent, HCP Plastene Bulkpack by 9620 percent. These were among the top performing penny stocks in the last 18 months.
As per data by BP Wealth, among the other top gainers in the last 18 months, Digjam Limited gave returns of 7197 per cent, GRM Overseas at 6469 per cent, Tata Teleservices at 6448 per cent, Cosmo Ferrites at 6130 per cent, Banas Finance at 6021 per cent, B&A Packaging at 5013 per cent, ARC Finance at 4942 per cent, Adinath Textiles at 4764 per cent, SEL Manufacturing Company at 4720 per cent, Waaree Renewable Technologies at 4227 per cent, Automotive Stampings and Assemblies at 3891 per cent, Rohit Ferro-Tech at 3867 per cent, Raghuvir Synthetics at 3827 per cent, Ashiana Agro Industries at 3757 per cent, Indian Infotech and Software at 3689 per cent and Pan India Corporation at 3569 per cent.
Swapnil Shah, Head of Research, BP Wealth, said that investors in penny stocks have garnered huge returns after the Covid-induced market crash in March 2020.
Shah said looking at the return data of penny stocks (share price in the range of Rs 0 to 20 as of July 2020), more than 850 stocks listed on the BSE have risen over 100 per cent in the past 18 months. Astonishingly, 102 stocks have risen over 1000 per cent in the same time period and 10 stocks have risen over 5000 per cent.
Shah said penny stocks are much riskier than larger stocks due to lower information and liquidity, but they do offer higher growth potential.
During rosy times, penny stocks tend to do extremely well. However, when things turn sour, they tend to tank, especially trapping retail shareholders. Thus, one should be careful and invest in penny stocks only after analysing their fundamentals and knowing their risks, Shah said.
Shah said penny stocks are generally considered those which trade in a single-digit or penny price or those which have a very low market cap. It’s because they trade at lower prices that investors believe they can buy a huge chunk of shares and have that psychological satisfaction of owning them, he added.
Generally, a stock trading in penny price could be due to either very small size of the company, collapse of the business which resulted in heavy decline in shares, or financing problems.
In the last three years, we have witnessed a large number of companies of decent size losing more than 90 per cent of their market cap due to various reasons, especially high debt, business failure etc. In most cases, the promoters pledge their shares with bankers against the loan, Shah said.