According to the data from Ace Equity, as many as 30 penny stocks have delivered multibagger returns to investors. Out of these counters, half a dozen names have rallied more than 600 per cent in the last five months.
iStockLow promoter holding, high debt, constant loss and muted financials are some typical characteristics of penny stocks.
New Delhi: When broader markets were under heavy selling pressure this year, punters on Dalal Street made hefty returns by betting their money on lesser-known counters.
The retail favourite penny stocks, against all odds, have delivered as much as 2,500 per cent returns since the beginning of the ongoing calendar.
Domestic and global factors such as geopolitical worries, war crisis, rising crude prices, inflationary worries, and persistent selling by overseas investors have jolted sentiments for Indian equity markets.
According to the data from Ace Equity, as many as 30 penny stocks have delivered multibagger returns to investors. Out of these counters, half a dozen names have rallied more than 600 per cent in the last five months.
There is no fixed theoretical definition for penny stocks. However, stocks whose prices are in single-digit or below Rs 10 fall under this category. ETMarkets.com has considered companies that had a market capitalisation of less than Rs 1,000 crore as of December 31, 2021, for this study.
Printing solution provider Kaiser Corporation, which has rallied 2,484 per cent in the year 2022 so far, has topped the list. The scrip zoomed to Rs 72.1 on May 31, 2022, from Rs 2.79 on December 31, 2021.
Metal merchant firm Hemang Resources came in second as its shares surged 1,225 per cent to Rs 40.95 from Rs 3.09 in the same period. Meanwhile, shares of Alliance Integrated Metaliks have advanced 1,070 per cent to Rs 40.95 from Rs 2.71 during the period under review.
Gallops Enterprises, Mid India Industries and BLS Infotech have jumped 985 per cent, 825 per cent and 675 per cent, respectively. Diligent Industries and Khoobsurat have added more than 400 per cent each in the current year.
Kranthi Bathini, Director- Equity strategy, WealthMills Securities said corporate governance is the biggest issue in penny stocks and people punt on these companies purely based on their low price and not value.
"Investors must look at the underlying business of the company to understand the value," he added. "Stock market must not be treated like a lottery ticket. Investors should not mix penny investing with value investing."
Investors should understand that penny stocks are highly volatile in nature and do not have ample liquidity. Investors might get trapped in such counters, which may lead to hefty wealth erosion during the bear phase.
Yash Gupta, Equity Research Analyst, Angel One said penny stocks might be on a rollercoaster ride, but investors generally face more misses than hits. Investors get trapped in such mediocre counters during the corrections, he cautioned.
"More often than not, penny stocks do not move upwards on the basis of fundamental reasons. Many of them are 'pump and dump' schemes, to which gullible investors fall prey. One should stick to sound fundamentals while investing."
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
iStock
ETMarkets.com
Get Unlimited Access to The Economic Times
