I hope you know that a penny stock characteristically refers to a small company’s stock that trades for less than $5 per share. And most of the time, they trade via over-the-counter (OTC) transactions. However, some penny stocks trade on large exchanges like the NY stock market (NYSE). And most of these trades are via over-the-counter (OTC) transactions through the electronic OTC Bulletin Board (OTCBB) or the privately-owned OTC Markets Group. There’s no floor for OTC transactions. Quotations also are all done electronically. To participate in the penny stock or buy any share, you have to know the penny stock market in detail. Mainly you have to focus on the List of Penny Stocks regularly. This article will keep a short but informative discussion on the List of Penny Stocks in India.
What are penny stocks?
Penny stocks are stocks that trade at low prices. Not only that, the penny stocks have low market capitalization and are mostly illiquid. These stocks (penny stocks) are lesser-known to the larger investing public. This type of trade is either less reliable or less accessible. Because investors will stay away from them or the reason for their fundamentals and imperfect knowledge, however, they’re also known for multi-bagger returns within specific trading sessions.
As penny stocks are mostly illiquid, meaning traded in significantly less quantity. Sometimes they are only a couple of orders, which can cause hitting the circuit limit on the exchange. These stocks mostly give higher returns when switching circuits for a variety of days. However, this era of circuit hitting is not related to the volume of trading. And the cause is either there is some story of traveling that stock. On the other hand, it’d be a result of manipulation by some stock operators who artificially inflate the worth.
Moreover, they raise the volumes to the conductor in innocent retail investors. Besides, later they offload their holdings when participation increases. Now that we’ve understood what penny stocks are. Let us see why penny stocks are called “Penny” Stocks.
Why are Penny Stocks called “Penny” Stocks!
Penny stocks trade at such low rates because most of the traders buying penny stocks don’t even care about them. Keep a mind setup with the appearance to exit sooner or later once they need to give decent returns. Penny stocks in India are often found non-compliant with exchange regulations and non-transparency in reporting.
There’s some news or some turnaround stories on penny stocks that they move. The speculation results in a rise in trading volumes and costs soar. But only a few of them end up being accurate or genuinely fundamentally more vital. Any negative news causes the worth to show south.
- An OTC stock refers to a little company’s stock that typically trades for fewer than $5 per share.
- Some penny stocks trade on large exchanges like the NYSE. But most of the penny stocks sell over the counter through the OTC Bulletin Board (OTCBB).
- While there are often sizable gains in trading penny stocks, there also are equal risks of losing a significant amount of an investment during a short period.
How’s the Penny Stock created?
Small companies and some start-ups naturally issue shares. They publish these shares as a means of raising their capital to grow the businesses. Although the process is long, the stock is often one of the quickest and most effective ways to start-up companies and obtain money quickly.
Like any other publicly traded stock, the Penny Stock is coming up by a process called an initial public offering or an IPO. To include it in the OTCBB, the Company must file a registration first, including the SEC’s statement. Or they need to prepare a file stating that the offer is eligible for exemption from registration. It must also check the state security laws in the locations where it plans to sell the stock. Once approved, the Company may initiate the process of soliciting orders from investors.
Finally, the Company may apply to have the stock listed on a more extensive exchange or trade on an over-the-counter market.
Price Instabilities of Penny Stocks:
Most of the time, the growing companies with limited cash and resources offer their shares in Penny Stocks Market. Penny Stocks are best suited to high-risk investors because they are primarily small firms.
Penny stocks naturally have a higher level of instability and are leading to better reward potential. As a result, there is a higher level of characteristic risk. Investors may lose their entire investment on the counter stock. We suggest that an investor borrows money from a bank or a broker to obtain shares even at a margin.
Due to the increased risk levels associated with investing in penny stocks, investors should take special precautions. For example, before entering a trade, an investor should have a default stop order. Besides, they need to know what price index to exit if the market moves in the opposite direction. They also need to stop-loss orders and set a target price limit. When the price reaches the target limit, the automatic sale of the securities becomes a must.
Though Penny Stocks may have explosive gains, it is essential to have realistic expectations. Besides, investors need to understand that Penny Stocks are high-risk for investments with low trading volumes.
Things to Keep in Mind While Buying One From a List of Penny Stocks:
People generally trading or investing in penny stocks are the lower retail investors. Usually, they don’t follow a portfolio approach. They’ are funding by news or tips from some unexpected sources. They think the price is too low. So, they feel if they buy, they will not lose much. They expect their capital will go to be double or triple if that news or tips are real. However, investors should always remember that they may invest in small amounts. But still, there is a possibility of losing 100% of their wealth.
Which Makes Penny Stocks Risky:
The risk of busting penny stocks is as high. The Company may shut down suddenly, or multi-bagger returns may be doubtful. Penny stock investment capital should not exceed 2-3 percent of a person’s portfolio value.
Investing in penny stocks is always speculative. First, investors should avoid investing in them, and if they buy any, they should treat it as buying a lottery. You shouldn’t join them emotionally in the hope of some good news.
Investors should never pursue a buy-and-hold approach. They should do it, even if they received good returns recently. Because, over time, neither shareholders can generate value nor follow a transparent reporting system. Investors should also conduct extensive stock research. They also need to keep an eye on public domain news. They will not become victims of an operator’s conspiracy to unload their holdings after price manipulation later.
Some penny stocks or a List of Penny Stocks also cost the transaction. And some per-share costs of the brokerage. Similarly, when stocks trade at low prices, the percentage spread between bid and asking price also appears significant.
Penny stock investors need to keep strong knowledge on news watch lists, speculation, price chart trends, and critical factors such as debt-to-equity ratios and cash flows.
However, this information varies daily, depending on news flow. Before investing in those stocks, the investor should also perform some relevant background checks in his capacity.
Why Do Penny Stocks Fail?
In the discussion of the List of Penny Stocks reasonably comes the point of knowing about the cause of Penny Stocks Failure. The below points is remarkable in this discussion.
- Lack of Information Available to the Public
- No Minimum Standards
- Lack of History
- Liquidity and Fraud
- Offer an area for little companies to realize access to public funding.
- In some cases, penny stocks may provide a way to realize access to more extensive marketplace listing.
- With a lower cost, penny stocks leave a significant upside in share appreciation.
- Penny’s stocks lack a liquid market with few buyers, perhaps even after their price has risen.
- There is limited information available on the financial record of the Company.
- Penny’s stocks are highly likely to be fraudulent and bankrupt by the underlying Company.
What are Penny Stocks in India?
As far as the creation of wealth cares, the stock markets present a lucrative opportunity. By opening a share trading account, you can trade the markets by investing within the right stocks. And you can achieve financial success from our investment in penny stocks as well. Typically, most people tend to stay to well-established large-cap and mid-caps stocks when it involves making money.
While a simple strategy is investing in penny stocks can also help you realize your financial goals. With a web trading account, you can invest in penny stocks easily.
List of Penny Stocks in India:
If one wants to draw down a list of 4 to 5 stocks for close monitoring, the table below is suitable for beginners.
|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP (Rs.) 4th Dec|
|5||HBL Power Systems||517271||HBLPOWER||23.5|
A detailed table with different parameters for Best Penny Stocks to be purchased:
|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP (Rs.) 4th Dec||Rating (Stars)||Industry|
|1||Vodafone Idea||532822||IDEA||9.75||0.50||TELECOMMUNICATION SERVICE|
|2||NHPC||533098||NHPC||21.8||1.00||POWER GENERATION & DISTRIBUTION|
|4||Jammu and Kashmir Bank||532209||J&KBANK||23.6||0.50||PRIVATE SECTOR BANK|
|6||Tata Steel BSL||500055||TATASTLBSL||38.8||0.50||Steel – CR & HR Strips|
|8||Hindustan Construction Company||500185||HCC||6.8||0.50||CONSTRUCTION & CONTRACTING – CIVIL|
|9||Orient Paper and Industries||502420||ORIENTPPR||18.95||0.50||DIVERSIFIED|
|10||Usha Martin||517146||USHAMART||26||0.50||STEEL – MEDIUM & SMALL|
|15||HBL Power Systems||517271||HBLPOWER||23.5||0.50||ELECTRIC EQUIPMENT|
We started the article to focus on the List of Penny Stocks in India. But in our detailed discussion, we tried to focus on the penny stocks market from every corner. With this article’s talk, everyone can understand the Penny Stocks and the List of Penny Stocks in India.
In a general sense, penny stocks are the marketplace where the small and newer companies offer their share to the public to gain capital quickly and easily. Most of the time, the value is less than $5 for each f the proposed share. Sometimes Penny stocks market is very profitable, But most of the time, investment in penny stocks is too much.
So penny stocks investment is for the risk-taking persons mostly. But in which investors are well aware and keep strong knowledge of penny stocks regularly, they fall into trouble n fewer cases. But who invest their money in the base of least experience and inadequate knowledge, maximum time they face vast losses. So always need to avoid the gossip and so-called news & trend. Some people believe in buying & holding method in this trade.
They think that they will get double or triple profit. But they can face significant losses due to their lack of real trend and up-to-date market strategy. So, investors should keep a keen eye on the List of Penny Stocks to profit from their investment.