Penny stocks join bull market party

During rosy times, penny stocks tend to do extremely well. However, when things turn sour, they tend to tank, especially trapping retail shareholders. Thus, one should be careful and invest in penny stocks only after analysing their fundamentals and knowing their risks, says Swapnil Shah, head (research), BP Wealth

New Delhi: More penny stocks or low-priced stocks have joined the party on Dalal Street on a day when the markets were lush green in colour with all indices in the positive.

These stocks have notched gains of close to 20 per cent in a single trading session. IANS has been reporting extensively on the upsurge in penny stocks with gay abandon with the regulator asleep on the wheel. On Monday, this activity was only accentuated with many more such counters in fast and furious mode.

Price rigging and manipulation through a carefully calibrated front running the operation by a cabal of operators is common enough on the bourses. This window dressing using the pump and dump method is something that that the regulator Sebi and the exchanges have to be wary of.

Last year, the corporate finance investigation department was set up at Sebi for greater surveillance and scrutiny, but it is obviously not doing enough as more and more 'cats and dogs' are being ramped up by cocking a snook at the controller of markets.

IANS has done a deep dive and found a fresh lot of shares where this nefarious activity is being done in a brazen manner. Pil Italica Lifestyle closed the day on BSE at the upper circuit of 20 per cent at Rs 13.26, up by Rs 2.21, on Monday.

Some penny stocks or low-priced stocks have given massive returns in the past 18 months with 102 stocks rising over 1000 per cent and 10 stocks rising over 5000 per cent.

After a continuous sell-off in the past three months or so, foreign portfolio investors have turned net buyers in the first week of January in the Indian equity segment, data showed. So far in 2022, FPIs have infused Rs 3,695 crore in the Indian equity.

The recent correction in domestic equity markets provided them a good buying opportunity, analysts opined.

"This (buying by FPIs) comes at a time when the market has recovered after a fall of almost 12 per cent from the high of 18,604 to a low of 16,410. FIIs seem to be more comfortable buying now with the start of the new rally post the correction ahead of the Q3 earnings. Also, with the run-up to the budget, we expect the FII buying trend to continue and the market to have a positive bias in the short term," said Jayesh Bhanushali, AVP, Research at IIFL Securities. Back to penny stocks, the misfeasance is now widespread and IANS has been throwing into stark relief how circular trading and pump and dump schemes are being run brazenly. It is high time that SEBI and the two exchanges start looking at the data and improve their surveillance mechanisms.

As per data by BP Wealth, Equipp Social Impact Technologies rose by a whopping 29385 per cent, Simplex Papers by 14479 per cent, TTI Enterprise by 13335 per cent, HCP Plastene Bulkpack by 9620 percent. These were among the top performing penny stocks in the last 18 months.

As per data by BP Wealth, among the other top gainers in the last 18 months, Digjam Limited gave returns of 7197 per cent, GRM Overseas at 6469 per cent, Tata Teleservices at 6448 per cent, Cosmo Ferrites at 6130 per cent, Banas Finance at 6021 per cent, B&A Packaging at 5013 per cent, ARC Finance at 4942 per cent, Adinath Textiles at 4764 per cent, SEL Manufacturing Company at 4720 per cent, Waaree Renewable Technologies at 4227 per cent, Automotive Stampings and Assemblies at 3891 per cent, Rohit Ferro-Tech at 3867 per cent, Raghuvir Synthetics at 3827 per cent, Ashiana Agro Industries at 3757 per cent, Indian Infotech and Software at 3689 per cent and Pan India Corporation at 3569 per cent. Swapnil Shah, head (research), BP Wealth, said: "Investors in penny stocks have garnered huge returns after the Covid-induced market crash in March 2020. Looking at the return data of penny stocks (share price in the range of Rs 0 to 20 as of July 2020), more than 850 stocks listed on the BSE have risen over 100 per cent in the past 18 months.