These 30 penny stocks delivered up to 6,000% return in 2021

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New Delhi: A glut of liquidity and the stunning interest of the next generation newbie investors in the domestic equity markets took the majority of stocks and indices to new peaks in 2021.

Despite the bleak health of the economy and rising concerns of new variants of Covid-19, retail-favorite penny stocks have emerged as the biggest beneficiaries in the current calendar year. As many as 30 penny stocks have delivered more than 1,000 per cent in 2021, whereas 90 of them have surged over 500 per cent in the current year, suggest data compiled from Ace Equity.

There is no theoretical definition for penny stocks. However, stocks in single-digit prices or below Rs 10 are bracketed in this club. ETmarkets has considered companies that had a market capitalisation of less than Rs 1,000 crore at the end of 2020.

Textile player Digjam has topped the list with a rise of over 5,935 per cent in 2021. The stock has rallied to Rs 247.45 on December 31, 2021, after settling at Rs 4.1 on the corresponding day of the previous year. An investment of Rs 1 lakh in Digjam on the last day of the previous calendar year would have become Rs 59.35 lakh today.

Another textile player, Adinath Textiles, has rallied over 4,800 per cent as the scrip rallied to Rs 84.5 from Rs 0.86 during the period under review. It was followed by the little-known microcap NBFC, TTI Enterprises, which zoomed about 4,570 per cent to Rs 62.1 on December 31.

Some typical characteristics of these stocks tend to be low promoter holding, huge debt, accumulated losses and poor dividend track record.

Market experts say penny stocks rose more in the bull market, which attracted investors. However, the gullible ones, entering late, do not get a chance to make an exit. Market experts advise conservative investors to avoid penny stocks. Sometimes such stocks are driven by market operators. When they fall, they are prone to lower circuits, making the exit impossible for small investors.

G Chokkalingam, Founder & MD, Equinomics Research & Advisory, says investors who made money from penny stocks should book profits and enjoy life as most of the companies do not have strong fundamentals to justify the valuations. “Only smart investors, who understand the limitations and principles of the penny stocks, are able to make money. Gullible investors simply try to chase a rally, lose money in almost every other case,” he added.

Gita Renewable Energy, Radhe Developers (India), Chennai Ferrous Industries, Brightcom Group, Rohit Ferro Tech, Indian Infotech & Software, Ushdev International, Cressanda Solutions, NCL Research, Pan India Corporation, MIC Electronics are the other names with have delivered 2,000-3,500 per cent returns.

ETMarkets.com

Kreon Financial Services, Lloyds Steel Industries, Banas Finance, Globus Power Generation and Sawaca Business Machines have delivered 15-20 times returns to the investors.

SEL Manufacturing, Baroda Extrusion, Tantia Constructions, PMC Fincorp, Sharp Investments, Visagar Financial Services, Clio Infotech, Texel Industries, Smiths & Founders (India) and Felix Global Venture advanced more than 1,000 per cent.

Penny stocksETMarkets.com

However, not all penny stocks rewarded investors in 2021. About three dozen of them eroded the wealth of investors, with 10 of them sliding over 20 per cent.

Sagar Productions destroyed about 63 per cent of the investor’s wealth, followed by Sun Retail, which tanked over 45 per cent. Trio Mercantile, Innovative Ideals and Services and Chandrima Mercantiles dropped up to 40 per cent each.

Penny stocksETMarkets.com

In general, a rise in stock prices tends to be backed by fundamental factors like good management, better financial performance and business expansion. That’s not the case in penny stocks. Investors should be careful not to get trapped into buying low-valued shares since that can degrade the quality of investments.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, says, “In a ferocious bull market like the present one, cats and dogs will also go up. But they will be butchered in a bear onslaught.”

Experience shows that wealth is created in the long run by high quality stocks. Investors chasing penny stocks will come to grief when the bull run ends, he adds.



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