Up to 8,000% return: These lesser-known stocks made investors crorepati in just 17 months

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At least 400 penny stocks on Dalal Street have made investors richer since the lows of March 2020, when Prime Minister Narendra Modi announced a nationwide lockdown as a move to curb the fast-spreading Covid-19 pandemic. With a rally of 7,828%, Equippp Social Impact Technologies have emerged as the top gainer in the list. The scrip has rallied to Rs 22.20 on August 5, 2021 from just Rs 0.28 on March 24. It was followed by GBL Industries (up 2721%), Jaykay Enterprises (up 2647%), Bihar Sponge (up 2,447%), Tata Teleservices (Maharashtra) (up 2,123%) and Andhra Cements (up 2,074%).

The benchmark BSE Sensex has gained 104% since March 24, 2020, while the BSE Smallcap and Midcap have advanced 201% and 135%, respectively, during the same period.

What are penny stocks?

Penny stocks are stocks that trade at very low prices (below Rs 10) and have low market capitalisation. These stocks are lesser-known to the larger investing public as investors remain away from them because the information regarding their fundamentals and businesses is either not reliable or not available. However, they are also known for multi-bagger returns within certain trading sessions.

Penny stocks are penny stocks for a reason

According to Samco Securities, 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. 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.

Other top gainers

Data with Ace equity showed that around 30 penny stocks have delivered between 1,000%-2,000% since March 2020 lows. Some of the stocks in the list included Garware Synthetics, ARC Finance, Digispice Technologies, Subex, Cosmo Ferrites, GTL, Kanel Industries, CG Power, Tamil Nadu Telecommunications, RRIL, Surat Textile Mills, Standard Surfactants, Lloyds Metal and Energy, and Brightcom Group.

How much to invest in penny stocks

Samco Securities said that the risk 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 capital that deserves to be invested in penny stocks should not be more than 2 to 3% of a person’s portfolio value.

Factors to watch

Market watchers said that investing in penny stocks is always on speculation. 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 do 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,” said Samco Securities.

(Stocks mentioned in the article are for information purposes only. Consult your financial advisor before taking any position).