13 penny stocks turned multibaggers since the market slump began. Did you catch them?
Penny stocks — typically having a price below Rs 30 per share — are among the most sought after names especially among the retail traders as they have the potential for explosive moves.
East India Drums, which is specialised in the production of steel drums and barrels used for storage and transportation of liquids, chemicals, and hazardous materials, soared nearly 438% from the market peak, leading the charts in the penny stock space.
Fone4 Communications, Pro Fin Capital, Bridge Securities, Quasar India, Manor Estates, Garodia Chemicals, PFL Infotech, Nikki Global Finance and Mid East Portfolio are some of the other stocks which have seen returns upwards of 100%.
The allure of penny stocks lies in low entry costs, but the downside is that there is a lot of volatility, speculative trading and liquidity crunch in this space. Hence, analysts advise investors to assess their risk tolerance before buying these stocks.
What should investors do?
What started as a par-for-course correction in Indian equity markets through the October-December 2024 quarter, turned into a violent sell off in January. In the last one month, the BSE small and midcap indices fell just about 7%.A note by SBI Funds Management said that the recent correction has brought about two welcome changes. First, the valuations argument for large caps is back near historical medians and the equity market sentiment is back towards the neutral region.
“Both these factors in turn imply that versus a significant equity underweight view that we have held for a long time now, we are tilting towards a more neutral view now,” it said.
Despite pockets of sharp rallies in the broader market, most analysts are preferring largecaps given that the small and midcaps are still trading at premiums. Motilal Oswal estimates that Nifty currently is trading at 19.9x on a one-year forward basis, and the same is much higher for the remote corners of the market.
From a macro perspective, the combination of tax cuts and rate cuts creates a favourable environment for economic growth, but its success depends on how effectively tax savings translate into higher consumption and investment.
“If inflation remains under control, India could be well-positioned for a steady recovery, making this a crucial period for businesses and investors to capitalize on emerging opportunities,” said Krishna Appala, Sr. Research Analyst, Capitalmind Research.
Data: Ritesh Presswala
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
