Last Updated – Sept 2022
In this article, we will cover
What are penny stocks?
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 decent 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.
List of Best Penny Stocks to Buy now in India
|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP – Sept 22||Rating
|1||ALOK INDUSTRIES LTD||521070||ALOKINDS||19.25||0.5||TEXTILES|
|2||DISH TV INDIA LTD||532839||DISHTV||16.8||0.5||BROADCASTING & CABLE TV|
|3||MOREPEN LABORATORIES LTD||500288||MOREPENLAB||31.75||0.5||MOREPENLAB|
|4||GMR INFRASTRUCTURE LTD||532754||GMRINFRA||38.8||0.5||AIRPORT SERVICES|
|6||VODAFONE IDEA LTD||532822||IDEA||9.1||0.5||TELECOM SERVICES|
|7||JAMMU&KASHMIR BANK LTD||532209||J&KBANK||32.2||0.5||BANKS|
|8||BANK OF MAHARASHTRA LTD||532525||MAHABANK||18.75||0.5||BANKS|
|9||INDIAN OVERSEAS BANK||532388||IOB||18.45||0.5||BANKS|
|10||MMTC LTD||513377||MMTC||36.95||0.5||COMM.TRADING & DISTRIBUTION|
|11||NBCC LTD||534309||NBCC||33.4||0.5||CONSTRUCTION & ENGINEERING|
|12||RAIL VIKAS NIGAM LTD||542649||RVNL||34.2||0.5||CONSTRUCTION & ENGINEERING|
|13||NATIONAL FERTILIZERS LTD||523630||NFL||51.55||0.5||FERTILIZERS|
|14||SJVN LTD||533206||SJVN||32.2||1||ELECTRIC UTILITIES|
|15||TV18 BROADCAST LTD||532800||TV18BRDCST||38.65||0.5||BROADCASTING & CABLE TV|
|17||NHPC LTD||533098||NHPC||38.6||0.5||ELECTRIC UTILITIES|
|18||UJJIVAN SMALL FINANCE BANK LTD||542904||UJJIVANSFB||24.55||0.5||BANKS|
|19||HBL POWER SYSTEMS LTD||517271||HBLPOWER||96.25||0.5||HBLPOWER|
|20||YES BANK LTD||532648||YESBANK||16.35||0.5||BANKS|
People who generally trade or invest in penny stocks are generally the lower class of retail investors who do not keep a portfolio approach and invest in them based on news or tip from some random sources.
They think the price is so low thatthey will not lose much but if the stock turns out to be good then it could double or triple their investment. However, investors should always keep in mind that they might be investing in small amounts but still, they can lose 100 percent of their capital.
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.
Below is some more information about Best penny stocks in India
Vodafone Idea Ltd
Vodafone Idea Limited is an Aditya Birla Group and Vodafone Group partnership. It is India’s leading telecom service provider. It is the third largest wireless operator by subscribers in India with a Market Share of approximately 22.83% as of FY22 of the Indian mobile telecommunications services industry.
The Company provides pan India Voice and Data services across 2G, 3G and 4G platforms. Competition from peers such as Reliance Jio and Airtel is a major blow to Vodafone’s business as it is losing subscribers slowly to them. Vodafone can be on a speculator’s radar, however, it is extremely risky and volumes should be closely observed before buying this stock.
You can watch our Spotlight video on Vodafone Idea by CA Paras Matalia, Head of Stockbasket.com to know his views on the stock.
NHPC Ltd is a Mini-Ratna Category-I Enterprise of the Government of India. The company is one of the largest organizations in the field of hydropower development in the country. It is a hydroelectric power generating company dedicated to the planning, development and implementation of an integrated and efficient network of hydroelectric projects in India. They execute all aspects of the development of hydroelectric projects, from concept to commissioning of the projects.
The company has a good dividend yield of around 4.86% and low debt to equity ratio. The stock has a broader price range and is currently in a long term uptrend.
Morepen Laboratories is a Pharmaceutical company. Morepen has steadily grown from a single product company to a multi-activity company with a global vision and satisfied customers in over 80 countries. The company has three state-of-the-art manufacturing plants in the northern state of Himachal Pradesh (HP) in India.
The main plant at Parwanoo is inspected and approved by the United States Food and Drug Administration (USFDA) for production of Loratadine, which is the best selling anti-allergy drug globally. It is the largest producer of Loratadine in the World and presently has over 90% market share of generic Loratadine in the US market, a supplier to top-class customers like Novartis, Merck, etc.
The company has a good debt to equity ratio of 0.03. Over the past decade, sales and profits has delivered a CAGR of 18% and 17%, respectively. The stock price has given a return of 15% for the same time period.
TV18 Broadcast Limited
TV18 Broadcast Ltd has been backed by the largest company in India as per the market capital, Reliance. Post Covid, the growth in the media and entertainment sector has been evident. TV18 has been aggressively taking initiatives to improve its market share. In an oligopoly market, the company has high chances of doing the same. Further, recently BodhiTree has invested in the firm in order to lead growth.
The stock has been in an uptrend with a range bound perspective with a range of Rs 30 – 70. Hence, with decent fundamentals and looking at the technical the stock seems a fair contender for penny stock trading.
Ircon International Limited
Ircon International Limited (IRCON) commenced its business in 1976 as a railway construction company, it diversified progressively since 1985 as an integrated engineering and construction PSU specializing in large and technologically complex infrastructure projects in various sectors such as railways, highways, etc. It is the only Indian PSU to make it to the list of top 250 international contractors.
The company has high order book which is more than 10x of its market capitalization and hence provides a strong revenue visibility to the company. Along with this, the other financials including dividend yield, debt to equity and profit growth seems strong. The stock has been in a long term uptrend and given the strong order book, the stock has a potential to become a multibagger in the future.
Trident Limited, the Trident Group’s flagship company, is a significant manufacturer of yarn, bed linen, and wheat straw-based paper, as well as chemicals and captive power. The company currently has manufacturing facilities in Barnala (Punjab) and Budhni (India) (Madhya Pradesh). The company is investing INR 1140 crores in yarn expansion and INR 200 crores in paper debottlenecking cum expansion projects over FY21-FY22 to increase capacity by 48,482 tonnes per annum (TPA) and 20,000 tpa, respectively. The company has a good 5 year average ROCE with 15.1% and a debt to equity ratio of 0.03. The company is trading at 18.7x P/E which is in line with its peers in the industry.
HBL Power Systems
HBL Power Systems Ltd is a listed Indian company, in business since 1977, with a focus on engineered products and services. The company’s business strategy was to identify technology gaps in India that they could fill by ‘indigenous efforts. The first products selected and successfully developed were Aircraft batteries – eventually leading to HBL offering the world’s widest range of specialized batteries. Now the company has become a leading supplier of specialized batteries and power electronics in India with a strong presence in several other countries. The stock has delivered a ROE of 5% in the past 3 years.
Best Penny Stocks: Here’s a quick video
List of Penny Stocks in India: Model Watchlist
If one wants to bring down the list to 4 to 5 stocks for closely tracking, then the below table is suitable for a beginner.
|No||Company Name||BSE Scrip Code||NSE Symbol||CMP – Sept 22|
|5||HBL Power Systems||517271||HBLPOWER||96.25|
Best penny stocks to buy: A detailed table with various parameters for
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|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP – Sept 22||Rating
|Industry||PE ratio||Dividend yield (%)||ROCE (%)||5 year average ROE (%)||Debt equity ratio||5 yr CAGR revenue (%)||5 yr CAGR PAT (%)|
|1||ALOK INDUSTRIES LTD||521070||ALOKINDS||19.25||0.5||TEXTILES||N/A||0||-0.63%||N/A||N/A||-22%||6.07%|
|2||DISH TV INDIA LTD||532839||DISHTV||16.8||0.5||BROADCASTING & CABLE TV||N/A||0||11.70%||-1%||0.2||1%||N/A|
|3||MOREPEN LABORATORIES LTD||500288||MOREPENLAB||31.75||0.5||MOREPENLAB||20.1||0||21.50%||16.40%||0.02||20%||41%|
|4||GMR INFRASTRUCTURE LTD||532754||GMRINFRA||38.8||0.5||AIRPORT SERVICES||N/A||0||1.08%||N/A||N/A||-6%||5%|
|6||VODAFONE IDEA LTD||532822||IDEA||9.1||0.5||TELECOM SERVICES||N/A||0||-51.7||N/A||N/A||3%||N/A|
|7||JAMMU&KASHMIR BANK LTD||532209||J&KBANK||32.2||0.5||BANKS||4.66||0||4.37%||-5%||16.2||3%||1%|
|8||BANK OF MAHARASHTRA LTD||532525||MAHABANK||18.75||0.5||BANKS||12.6||0||4.25%||-14%||14.5||-2%||37%|
|9||INDIAN OVERSEAS BANK||532388||IOB||18.45||0.5||BANKS||23||0||4.71%||-28%||14.4||-6%||18%|
|10||MMTC LTD||513377||MMTC||36.95||0.5||COMM.TRADING & DISTRIBUTION||83.6||0||-0.90%||-2%||24.2||19%||20.40%|
|11||NBCC LTD||534309||NBCC||33.4||0.5||CONSTRUCTION & ENGINEERING||29.7||1.19%||16.00%||17%||N/A||-3%||-7%|
|12||RAIL VIKAS NIGAM LTD||542649||RVNL||34.2||0.5||CONSTRUCTION & ENGINEERING||6.11||4.82%||11.30%||15.40%||1.02||28%||17%|
|13||NATIONAL FERTILIZERS LTD||523630||NFL||51.55||0.5||FERTILIZERS||42||0||9.04%||12%||1.29||9%||5%|
|14||SJVN LTD||533206||SJVN||32.2||1||ELECTRIC UTILITIES||7.1||7.65%||15.00%||13%||0.39||0%||4%|
|15||TV18 BROADCAST LTD||532800||TV18BRDCST||38.65||0.5||BROADCASTING & CABLE TV||18.6||0||14.90%||5%||0.17||37%||19%|
|17||NHPC LTD||533098||NHPC||38.6||1||ELECTRIC UTILITIES||8.2||5.62%||9.21%||9%||0.65||3%||10%|
|18||UJJIVAN SMALL FINANCE BANK LTD||542904||UJJIVANSFB||24.55||0.5||BANKS||N/A||0%||5.81%||N/A||5.16||N/A||N/A|
|19||HBL POWER SYSTEMS LTD||517271||HBLPOWER||96.25||0.5||HBLPOWER||28.6||0.57%||4.43%||4%||0.08||-7%||3%|
|20||YES BANK LTD||532648||YESBANK||16.35||1||BANKS||N/A||0||3.15%||-9%||6.83||8%||N/A|