Investors are typically advised to follow the strategy of ‘buy and forget’ to reap the benefits of long-term wealth creation and not be intimidated by short-term volatility levels. To be able to achieve their financial goals, investors usually prefer investing in blue-chip companies that assure one of regular dividends and capital gains. However, investors can additionally opt to buy multibagger penny stocks, which generate high returns in a short period, while diversifying their portfolio at the same time.
So, with this objective, we will now explain what penny stocks are, and which are some of the best penny stocks to buy in India.
What are Penny Stocks?
By Penny stocks, we mean the stocks that are traded at very low prices on the stock exchange. Some conjecture that shares priced under Rs. 50 can be classified as penny stocks. Penny stocks are largely illiquid and have low market capitalisation values.
Since investors generally do not have a lot of information about a penny stock’s fundamentals, it is the traders who may choose to speculate in penny stocks, thus leading to high volatility levels. However, despite the increased risks, penny stocks have the potential to generate massive returns for their investors.
List of Top Penny Stocks in India
Below is a list of a few penny stocks to buy now that have the potential to become multibagger penny stocks in India.
|Market Cap (in Rs. crore)||Net Profit Margin (%)||Debt to Equity Ratio (%)||Price to Sales (%)||Promoter Holding (%)|
|Indian Overseas Bank||42,606||10.2||11.5||2.31||96.4|
As on 24th March 2023
Overview of the Best Penny Stocks to Buy in India
Vodafone Idea (Vi)
Vodafone Idea, commonly shortened to Vi, is an Indian telecom operator, which was formed through a partnership between Aditya Birla Group and Vodafone Group. It provides voice and data services across 2G, 3G, 4G, and 4G+ platforms. Its current trade price is hovering at Rs. 6.25.
The Vodafone share price has gone up by 12% in the last month and has generated a return of over 80% in the past 3-year period. Even though the Vodafone share price has generated negative returns on a YTD basis over concerns of increased losses, its prospects are expected to improve with the government approving the conversion of Vi’s AGR-related dues into equity.
Headquartered in Pune, Suzlon Energy is an Indian multinational wind turbine manufacturer. Suzlon Energy has been offering a 360-degree solutions package that covers the entire spectrum of wind energy projects to its customers since 1995. The Suzlon share is currently priced under Rs. 8.10.
Another penny stock to buy is Alok Industries, which is India’s largest fully integrated textile company. Its speciality lies in the cotton and polyester segments.Alok Industries is currently priced at Rs. 12.50.
This Chennai-based coal trader has a history of being initially incorporated as an NBFC. However, its certificate was cancelled in 2015, and since then, Hemang Resources has been engaged in the business of coal and infrastructure.
The Hemang share price has returned a gravity-defying 1,264% in 2022 itself. Hemang’s share price over the past year has rallied by over 930%.
Indian Overseas Bank (IOB)
Founded in 1937, IOB is a nationalised bank under the Ministry of Finance, based in Tamil Nadu. The government holds over 96% shares of IOB. It also has overseas branches in Singapore, Hong Kong, Bangkok, and Colombo.
The IOB share price has zoomed over 9% in the last month, which has further improved to 14% over the last 3-month period. Indeed, the performance of the stock is consistent and has returned nearly 91% in the past 3 years.
Factors to be considered
While penny stocks hold the potential of transforming into multi-bagger stocks, this increased return potential is accompanied by high risks as well. Here are a few factors that you must consider before choosing to invest in penny stocks.
Penny stocks are generally volatile and illiquid. Hence, instead of taking a huge exposure to a particular penny stock, you should consider diversifying your stake in multiple penny stocks.
This means, first, decide how much of your portfolio will be apportioned to highly-risky penny stocks and then split this investment amount among different penny stocks.
Filter out penny stocks based on their fundamentals and pricing. You should prefer investing in penny stocks that are priced in their lower ranges to be able to minimise losses while improving your chances of making windfall gains.
Also Read: What are Penny Stocks? How to Pick Them
The above-mentioned list of best penny stocks to buy in India is by no means exhaustive and is indicative in nature. Penny stocks investments should not form the centre of your portfolio. Instead, you shouldn’t apportion more than 2-3% of your portfolio to such high-risk stocks.
Research the penny stocks in-depth and only then plunge into this high-risk-high-reward world of penny stocks by opening a Demat account with Angel One.
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.