When people consider making stock market investments, large organizations come to mind or, for that matter, trading in the greatest intraday stocks. They will favor the biggest firms in India, like Reliance, Infosys, and TCS, among others. Some people search for penny stocks that provide their portfolio some variety. Stocks known as penny stocks typically trade for less than 50 rupees. They are typically illiquid and have a small market capitalization. Smaller investors are less familiar with penny stocks. Because the information about their fundamentals and operations is either unreliable or unavailable, investors stay away from them. However, within a few trading sessions, penny stocks are renowned for producing multi-bagger gains.
The lowest class of retail investors who do not maintain a portfolio and who instead buy in penny stocks based on news or tips from unreliable sources are typically those who trade or invest in them.
They believe that because the price is so cheap, they won’t lose much money, but if the company performs well, their investment may double or triple. Investors should constantly bear in mind that even though they may be making little investments, they still run the risk of losing all of their money.
Due to the illiquidity of penny stocks, sometimes only a small number of orders can cause the exchange to reach its circuit limit. When these equities are hitting upper circuits for several days, they typically offer bigger rewards. Typically, there are no trade volumes throughout this period of hitting circuits.
A solid fundamental narrative might occasionally cause the stock to increase. Other times it can just be a case of manipulation by stock operators. For the purpose of luring uninformed ordinary investors, they artificially raise the price and volume. When there are enough investors trading the stocks, they will sell their own shares.
A penny stock has an equally high risk of failing. A quick closure of the business is a possibility, as is the likelihood of multi-bagger returns. No more than 2 to 3 percent of a person’s portfolio worth should be allocated to penny stock investments in total.
The majority of penny stock investing is speculation. Investors should first refrain from investing in them, and if they do, they should consider it as if they were purchasing a lottery ticket. In an effort to receive some positive news, you shouldn’t ever become emotionally attached to them.
The buy-and-hold strategy is also never recommended for investors, even if recent returns have been strong. Because neither of them can consistently create value for shareholders nor do they adhere to an open reporting system. To avoid falling prey to a conspiracy by operators who sell off their shares after manipulating the market, investors should conduct extensive study on the stock and current events.
Some penny stocks also have higher transaction costs, and some trading fees are calculated per share. Similar to how the spread between the bid and ask price increases in percentage when equities are traded at extremely low prices.
The stocks listed in the watchlist were chosen after taking into account news, rumours, price chart trends, and a few fundamental variables like the debt to equity ratio and cashflows.
However, this information will change daily based on news flow, so before buying these stocks, an investor should conduct any necessary background investigations.
Additional details regarding the best penny stocks in India are provided below:
Here are the penny stocks that have performed the best so far in 2022.
1. Shankar Lal Rampal
Shankar Lal Rampal, which was trading at Rs 80 at the beginning of this year, has had an amazing one-way rally. Currently trading at Rs 181.5, Shankar Lal Rampal has a market value of Rs 3.9 billion. That’s a gain of 126% so far in 2022.
A well-known dealer, exporter, importer, and supplier of sulphur dyes, paraffin wax, phosphoric acid, sodium sulphide, hydrogen peroxide, citric acid monohydrate, phosphate chemicals, and refined glycerine in India is Shankar Lal Rampal Dye-Chem.
The stock has been rising ever since the company’s board last year approved the recommendation for the issuance of bonus shares. Since November 2020, Shankar Lal Rampal has paid out two bonuses.
Over the past five years, Shankar Lal Rampal has steadily grown return on equity (ROE).
Every day, the company’s stock price reaches a new 52-week high, and it appears that more gains are possible due to the PLI scheme for the chemical sector.
Promoters of the company held 73.55 percent of the company as of December 2021, with no shares being pledged. And that’s advantageous.
2. Gujarat Mineral and Development Corporation (GMDC)
Since it implemented price increases in the lignite division in January 2022, shares of the state-owned mining player and smallcap business GMDC have been under scrutiny.
The price increase is anticipated to help the financial situation of GMDC, which now operates 5 lignite mines.
According to GMDC’s fiscal 2021 annual report, India’s coal production is expected to increase in the next few years as a result of the government’s intentions to replace the nation’s captive mining policy for coal and iron ore with an open bidding one. The central government has allocated five mining leases for GMDC, which will increase coal output and assist the company’s revenues.
The turnaround results are a crucial factor supporting the stock in addition to the price increase. In comparison to the same quarter last year, GMDC’s sales increased to Rs 7.3 billion from Rs 3.3 billion. Profit after tax increased significantly sequentially from Rs 0.4 bn to Rs 1.5 bn.
Being the largest merchant seller of lignite in the nation, GMDC has a strong infrastructure, which is reflected in its financial performance. Roopwant Singh, IAS, Managing Director, GMDC, was reported as adding that this is a confirmation of the company’s collaborative approach to business transformation.
Over the past five years, GMDC’s mining volume has been stable, but things are starting to change. The stock has already increased by 80% in 2022, and it appears that it will continue to rise.
3. Mahalaxmi Rubtech
A textile manufacturer that is a member of the Mahalaxmi Group of Industries is Mahalaxmi Rubtech. It produces and sells traditional textile items as well as technical textile products.
The group has been involved in the production and export of textiles, synthetic rubber/PU-coated fabrics, dyes, pigments, and auxiliary materials.
The company makes rubber coated cloth in its technical textiles segment, which is mostly used in offset printing equipment. The performance of this division has improved over the past few years as a result of rising demand and increased market acceptance, particularly due to competition from imported goods.
The stock, which was trading at roughly Rs 63 at the beginning of 2022, has soared to Rs 126 at the moment, representing a gain of 77% in just over two months.
So what exactly led to a significant increase in the price of Mahalaxmi Rubtech stock?
While the precise causes are unknown, it is reasonable to conclude that the stock has increased for two reasons: an improvement in financial performance and a significant reversal in the textile business. The industry is about to undergo a significant comeback after a three-year dry period. Profitability is more readily seen in textile companies. They are favourably reacting to the China plus one policy.
In addition, the government has established a PLI scheme to support India’s textile manufacturing capacity, with a total investment of Rs 106 billion. Mahalaxmi Rubtech appears to be having a good time at the celebration, and India’s textile sector is expected to grow rapidly.
4. Vodafone Idea (Vi)
Indian telecom provider Vodafone Idea, often known as Vi, was established by a collaboration between the Aditya Birla Group and the Vodafone Group. On 2G, 3G, 4G, and 4G+ platforms, it offers voice and data services. At around Rs. 9.75, its current trade price is closer to its 52-week low price of Rs. 7.75.
The price of Vodafone shares has increased by 12% over the past month and has created a return of more than 80% over the last three years. The government’s approval of the conversion of Vi’s AGR-related dues into stock is likely to strengthen its prospects, even if the Vodafone share price has had negative returns on a year-to-date basis due to worries about potential increases in losses.
5. Suzlon Power
Suzlon Energy is a multinational Indian manufacturer of wind turbines with its headquarters in Pune. Since 1995, Suzlon Energy has provided its clients with a comprehensive portfolio of solutions that covers every type of wind energy project.
The 52-week high and low share prices for the Suzlon share, which is now trading below Rs. 10, are Rs. 13.10 and Rs. 5.90, respectively. The stock, which is very speculative, has gained 21% during the last month. The price of Suzlon shares has increased by more than 40% in the last year. Over the past three years, Suzlon has generated returns of almost 190%. India Market (moneynotsleep.com)
Disclaimer: This material is provided for informational purposes only and is not intended to be a recommendation to purchase or sell any specific stocks.