Penny stocks are stocks that have low market capitalisations and have a higher degree of volatility. These stocks are generally priced under Rs. 10 per share. These stocks have a greater than usual bid/ask spread. They tend to demonstrate a lot of swings in the prices because they are susceptible to a higher degree of reactions on any given news item or event because of lower clarity of information about the shareholders and the companies’ general information.
Why invest in penny stocks?
Penny stocks have their own rationale for trading. If you are certain of your trading logic, you can try to identify and start with the stocks to buy today. The two basic reasons behind trading a penny stock are:
Evolution: Most penny stocks have a chance to develop into a multi-bagger. Being an investor, if you can do thorough research and possess the knack to analyse the valuations of stock, placing an informed bet backed with enough logic, you may be able to generate an outstanding return on your investment. Many of the stock market gurus of today have been able to identify the right stock at the right time and have reaped the benefits of such investments.
Returns: As these stocks have lower pricing as compared to a blue-chip stock and a higher degree of volatility, these stocks can fetch you a reasonable return when done for short-term trading purposes as well. Besides returns, these stocks are also a perfect fit for a newbie trader who can start pursuing the market using these stocks to buy, as these will require lesser employment of capital and have greater flexibility.
Best penny stocks for 2021 in India:
We have tried to identify the best penny stocks for 2021 in India from the Penny Stock 2021 list as per the Tickertape screener.
Chartered Logistics: A solid-looking stock with an intact promoter holding and consistency in sales and revenue. Long-term views are quite optimistic.
Yamini Investment: After recent price swings, this stock looks like a good bet for the short term. Promoter holding is intact; after this level, there can be a decent rise.
Sumeru Industries: Again, a solid-looking bet with an increasing cash flow and stable promoter holdings.
Nyssa Corporation: This is a reasonably well-looking stock, backed with solid performance and no drawbacks as of now.
Suzlon Energy: A rising trend in the company’s sales and decent-looking fundamentals can take this stock to higher levels.
Note: Do not regard this information as suggestions for initiating any trade/Investment. Make sure to consult a financial expert before making any investment decisions.
Conclusion
Penny stocks are a risky proposition. Before investing in these stocks, thorough research and analysis should be done as the value of stocks rising and going bust often go hand in hand. Penny stocks should have a part in one’s portfolio but only to the extent to which you are willing to take a higher risk.
Investing in stocks requires a deeper commitment and understanding of various parameters affecting the prices. Hence, it’s helpful to consult a trusted financial expert who can guide you with the latest events and help you with research from time to time.
