According to the data from Ace Equity, 20 penny stocks were able to tide through tough times to rally up to 725 per cent so far this year.
Apart from these stocks, 30 others have zoomed between 70-100 per cent during the period under review. At the same time, BSE Sensex and NSE Nifty have dropped about 10 per cent each on a year-to-date (YTD) basis.
The latest round of corrections has been triggered by a war between Russia and Ukraine which led to a rise in crude prices and sharp outflows from foreign investors. Apart from these, inflationary worries, hawkish commentary from Federal Reserve and other central banks, and rich valuations also marred the equity markets.
Commenting on the market fall, Jim O’Neill, Chairman, Chatham House said in an interview to ETNow that long term investors should not panic as crises offer the best buying opportunities.
“India has more control over its own destiny than many of the places,” he added. “India would be amongst the places that will be set to recover the most dramatically as and when things calm down.”
According to the data, trading player of agri products Tine Agro has topped the gainers’ list with a 725 per cent rise. The scrip zoomed to Rs 31.8 on March 7 as against Rs 6.8 on December 31, 2021.
With more than a 700 per cent rally, Kaiser Corporation, engaged in the printing of labels, articles of stationery, magazines and cartons, followed suit. The scrip has surged 720 per cent to Rs 22.95 from Rs 2.79 at the end of December.
They are followed by IT player BLS Infotech and textile firm Khoobsurat, which have gained 646 per cent and 586 per cent, respectively during the period under review.
Kiran Syntex, Hemang Resources, MPS Infotecnics and Elegant Floriculture & Agrotech (India) are some of the other stocks which delivered between 270-370 per cent returns to investors.
Swiss Military Consumer, Corporate Courier & Cargo, Triveni Glass, Tranway Tech, Innovative Ideals & Services, Nikki Global Finance and Biogen Pharmachem Industries have gained more than 120 per cent this year so far.
IL&FS Engineering and Construction, Regency Trust, Macro International, Madhusudan Securities and Luharuka Media & Infra are among the remaining penny stocks that turned multibaggers during the said period.
Penny stocks have no defined theoretical definition. However, stocks in single digits or below Rs 10 are bracketed in this club. In this study, companies with a market cap of less than Rs 1,000 crore at the end of 2021 have been considered.
Some typical characteristics of these stocks tend to be low promoter holding, huge debt, accumulated losses and poor dividend track record.
Market experts have often warned investors that expecting such astronomical returns from all penny stocks would be a mistake. Such stories only attract attention, but actually lack fundamental strength.
As a word of caution, Ajit Mishra, VP- Research, Religare Broking said that irrespective of market conditions, investors should prefer companies with strong fundamentals.
“If an investor is stuck in such ‘cheap’ stocks during the corrective phase, it’s prudent to exit them and look for better opportunities. One should utilize this decline to invest in quality counters,” he advised.
However, not all penny stocks have rewarded investors. Seventeen such stocks have dropped more than 45 per cent since the beginning of 2022, with five of them eroding 60-65 per cent of investors’ wealth.
Superior Finlease (down 65 per cent), Indosolar (down 64 per cent), Usha Martin Education (down 61 per cent), Ballarpur Industries (down 60 per cent) and Satra Properties (down 60 per cent) were leading wealth destroyers.
Other money spoilers include Samtex Fashions, Gujarat Investa, Starlite Components, Indian Infotech & Software, Suryachakra Power Corporation, which dropped more than 50 per cent.