More than 850 penny stocks rose over 100% in the past 18 months

New Delhi: Some penny stocks or low-priced stocks have given massive returns in the past 18 months with 102 stocks rising over 1000 percent and 10 stocks rising over 5000 percent.

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 percent, Simplex Papers by 14479 percent, TTI Enterprise by 13335 percent, HCP Plastene Bulkpack by 9620 percent. These were among the top performing penny stocks in the last 18 months.

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As per data by BP Wealth, among the other top gainers in the last 18 months, Digjam Limited gave returns of 7197 percent, GRM Overseas at 6469 percent, Tata Teleservices at 6448 percent, Cosmo Ferrites at 6130 percent, Banas Finance at 6021 percent, B&A Packaging at 5013 percent, ARC Finance at 4942 percent, Adinath Textiles at 4764 percent, SEL Manufacturing Company at 4720 percent, Waaree Renewable Technologies at 4227 percent, Automotive Stampings and Assemblies at 3891 percent, Rohit Ferro-Tech at 3867 percent, Raghuvir Synthetics at 3827 percent, Ashiana Agro Industries at 3757 percent, Indian Infotech and Software at 3689 percent and Pan India Corporation at 3569 percent.

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 percent in the past 18 months. Astonishingly, 102 stocks have risen over 1000 percent in the same time period and 10 stocks have risen over 5000 percent.

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 percent 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.

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