Penny stocks are low-priced, speculative stocks of small companies that trade at a relatively low volume. These stocks are usually priced under ₹10 in India and can be highly volatile.
They have gained popularity among investors in India due to their potential for high returns. Many investors see buying penny stocks for long term as an opportunity to invest in small companies with high growth potential.
This blog will provide a comprehensive guide to Indian penny stocks, including their definition, characteristics, benefits, risks, strategies & how to find penny stocks for successful investing.
What are Penny Stocks?
Now that you know what are penny stocks, let’s understand how to trade in penny stocks to get the highest returns.
Penny stocks are traded on stock exchanges for less than ₹10. In India, they must be purchased for at least ₹0.01. The NSE and the BSE are where these pump and dump stocks are traded in India. These are commonly referred to as shares of firms with a market capitalization of less than ₹10 crores in India
Multibagger penny stocks list NSE refer to stocks that trade at a low price but have the potential to deliver multifold returns in the future. In India, these stocks can be found in various sectors such as healthcare, IT, and infrastructure.
Features of Penny Stocks
Let’s understand the various features that can help you identify the best penny stocks for your portfolio:
- Low Liquidity: Penny stock is generally associated with small enterprises and moves sparingly, indicating a lack of market liquidity or buyers. As a result, because buyers are not always accessible, investors may find it challenging to sell a penny stock in an emergency.
- Limited Historical Data: Some of the firms listed as penny stocks may be brand new, while others may be in danger of going bankrupt. These companies generally don’t have any history at all or have a very bad history.
- Highly Volatile: Penny stock often exhibits higher levels of volatility, which leads to greater potential for profit and, as a result, higher levels of risk.
- Low Cost Per Share: Penny share prices are inexpensive to buy as compared to other shares.
Top Penny Stocks List 2023
Let’s have a look at the top penny stocks to buy today that can offer you the highest return.
|Stock Name||Sub-Sector||Market Cap (in Cr)||Share Price|
|Vodafone Idea Ltd||Telecom Services||₹43,324.92||₹9.05|
|Jaiprakash Power Ventures Ltd||Renewable Energy||₹5,482.77||₹8.15|
|RattanIndia Power Ltd||Power Generation||₹ 3,195.21||₹6.50|
|Steel Exchange India Ltd||Iron & Steel||₹1,186.63||₹9.75|
|GTL Infrastructure Ltd||Telecom Infrastructure||₹960.50||₹0.7|
|Syncom Formulations (India) Ltd||Pharmaceuticals||₹822.50||₹8.65|
|Rhetan TMT Ltd||-||₹796.68||₹9.87|
|GVK Power & Infrastructure Ltd||Airports||₹710.64||₹4.7|
|Vikas Lifecare Ltd||Plastic Products||₹553.22||₹4.35|
Note: The data is from 29th August, 2023. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Types of Penny Stocks to Buy in India
Penny stocks in India can be classified into three types: turnaround, speculative, and growth stocks.
- Turnaround Stocks: Stocks of companies that have a history of poor performance but are expected to recover.
- Speculative Stocks: Stocks of companies with uncertain future prospects.
- Growth Stocks: Stocks of companies that are expected to grow rapidly in the future.
Overview of the Top Penny Stocks
Here is an overview of the top penny stocks from the list.
1. Vodafone Idea Ltd: Vodafone Idea is a major telecommunications company in India formed through the merger of Vodafone India and Idea Cellular. It provides mobile and data services to millions of customers.
- High Risk: Stock is 3.91x as volatile as Nifty
- Midcap: With a market cap of ₹43,324 cr, the stock is ranked 150
2. Jaiprakash Power Ventures Ltd: Jaiprakash Power Ventures is an Indian power company that engages in the generation of renewable energy and operates thermal and hydropower plants. The company has been part of the diversified Jaypee Group.
- High Risk: Stock is 3.99x as volatile as Nifty
- Smallcap: With a market cap of ₹5,482 cr, the stock is ranked 584
3. RattanIndia Power Ltd: RattanIndia Power is another player in the Indian power sector, with a focus on thermal power generation. The company aims to contribute to India’s energy needs through its power projects.
- High Risk: Stock is 4.75x as volatile as Nifty
- Smallcap: With a market cap of ₹3,195 cr, the stock is ranked 740
How to Invest in Penny Stocks?
Investing in penny stocks, which are low-priced and often highly volatile securities, offers various avenues for individuals seeking potentially high returns but also exposing themselves to significant risk. One common approach is through traditional brokerage accounts. Another avenue is through over-the-counter (OTC) markets and Pink sheets stocks, where it trade penny stocks, offering a wider range of investment opportunities. Additionally, exchange-traded funds (ETFs) focused on small-cap or micro-cap stocks can provide diversified exposure to this segment.
However, if you’re confused about which stocks to pick, you can explore smallcases:
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- They’re created and managed by SEBI-registered experts,
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers.
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
Pros and Cons of Investing in Penny Stock Shares
Let’s have a look at the advantages and disadvantages of these pump and dump stocks:
|Returns||Penny stocks can provide significant returns in a short period of time.||Penny stocks are highly volatile and can experience large price swings, resulting in significant gains or losses.|
|Cost||Penny stocks are inexpensive to purchase, allowing investors to diversify their portfolios.||Due to low trading volumes, penny stocks can be difficult to sell quickly, leading to potential losses.|
|Company||Penny stocks are often associated with small companies that have the potential to grow rapidly.||Information about penny stocks is often limited, making it difficult to make informed investment decisions.|
|Risk||Penny stocks provide small businesses a way to access funding from the public.||Penny stocks are often used in fraudulent schemes and are thus, very risky.|
Is Penny Stock a Good Investment?
Even one penny stocks have gained popularity among investors because they have the ability to generate rapid development in a short amount of time. Small investments can provide significant returns.
- A lot of respectable companies deal in penny shares. They can have established management and teams, solid financial standing and improving ratios, increasing revenue, and ground-breaking goods or services that are prepared to rule an industry.
- We are all familiar with the rush that comes with significant investing gains (and losses). Hunting, penny stocks trading, and penny stock investment are all fascinating and exciting.
- A small amount can grow into considerably more! The bulk of penny stocks trading starts out with little sums. A person may only be able to buy three or four blue-chip stocks of companies with ₹1000 to trade but they may purchase thousands of best penny shares for the same sum of money.
- Not all penny stocks see quick price changes. However, those who do frequently cause significant price changes in days as opposed to years.
Note: Due to their lack of liquidity, penny stock may be a risky investment. For instance, a list of penny stocks are bought at a very low price and can give you the highest return. Some of these stocks fade away over time and may even be delisted, which would mean losses. Therefore, it is not necessary that investing in penny stocks would result in phenomenal returns.
Who Should Invest in Penny Stock?
- Penny stocks are the best investment choice for people who are new to investing. They give more freedom for experimentation and help inexperienced investors learn the basics of penny stocks trading.
- They are inexpensive solutions because of their minimal costs, which also help investors avoid potential losses. Since trading with such companies doesn’t require a professional or technical analysis because penny share prices are mostly speculative in nature.
- Penny companies seldom capitalise on the market, so their stock only trades occasionally. Investors who own these shares might employ a staggered purchasing or selling strategy to increase their holdings or reduce their holdings.
- Some businesses also benefit from issuing debt free penny stocks to potential investors first before entering a bigger market. Given their current cheap pricing, share appreciation has considerable upside potential.
- However, traders must take into account the higher risks they expose themselves to the highest return chances become available when investing in penny shares.
Tips to Consider How to Invest in Top Penny Stocks for the Long Term?
Investors must be careful in their research and diversify their investment portfolio to protect themselves from any hazards associated with the greater return prospects of good penny stocks.
Here are some tips to buy penny stocks in India:
- Do your research: Before investing in any penny stock, you must do your research. Look for stocks of companies that have a strong business model, financial statements (like balance sheet), good management, and strong growth potential.
- Diversify your portfolio: These stocks are highly risky, so it’s important to diversify your portfolio to minimize your risks. Invest in stocks of different companies and sectors to spread your risks.
- Use limit orders: When buying or selling these stocks, use limit orders instead of market orders. This will help you avoid paying a higher price than you intended.
- Set stop-loss orders: Set stop-loss orders to limit your losses. This will automatically sell your shares if the stock price falls below a certain level.
Common Mistakes to Avoid When Buying Penny Shares
When buying Indian penny stocks, it’s important to avoid common mistakes that can lead to losses. Here are some mistakes to avoid:
- Falling for Hype: Penny stocks are often promoted through hype and speculation. Avoid falling for the hype and make informed investment decisions based on research and analysis.
- Overtrading: Penny stock trading is highly volatile, so it’s important to avoid overtrading. Stick to a trading plan and avoid impulsive trades.
- Ignoring Risks: Penny shares are a highly risky investment, so it’s important to be aware of the risks and manage them effectively.
To Wrap It Up…
In summary, good penny stocks can be a great investment opportunity for those looking to make a high return on a low initial investment. However, it is important to conduct thorough research, choose the right stocks, and have a solid investment strategy.
Here are the top 3 AI companies to invest in – Vodafone Idea Ltd, Jaiprakash Power Ventures Ltd & RattanIndia Power Ltd. However, it’s important to do your own research or consult a financial advisor before investing.
Here are the steps in more detail:
1. Establish a brokerage account with a suitable penny stock-supporting stockbroker.
2. Conduct thorough research on penny stocks.
3. Choose promising one penny stock for purchase.
4. Execute your desired penny stock purchases by placing buy orders.
However, experience hassle free way of portfolio investing via smallcase.
Penny stocks are attractive investment options for short-term gains. However, if you’re willing to invest long-term, then look for other long-term investment plans.
Yes, penny stocks can be profitable for investors, but the risk is high. You can buy these stocks at low prices and sell them when market conditions rise.
Ashish Chugh is known as the king of penny stocks in India. He is a Delhi-based trader who has made a fortune by investing in penny stocks. He is known for his ability to identify undervalued penny stocks and generate significant returns.
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