After a decade, 200 penny stocks rise up to 1000% since 2012
Several penny stock counters, which remained dormant for more than a decade, have seen a pick up in activity since the past few months, with promoters and small operators trying to lure investors to these counters. Penny stocks are shares that are low-priced and enjoy a low market cap. Nearly 200 such stocks, which were never traded since 2000, have seen a resumption of trading on the BSE in the past one year.
Some of these stocks have appreciated between 100 per cent and 1000 per cent months after making a comeback, while a few of them hit the upper circuit successively over the period.
For instance, shares of Surabhi Chemicals, which commenced trading after 16 years at Rs 2.52 last year, now quotes at Rs 37.40, an appreciation of 1,384 per cent. The company, which posted a total revenue of Rs 1.2 crore in FY12, has hit successive upper circuits since resumption of trade last August.
SRK Inds, which recommenced trading after a gap of 12 years on February 13 last year, rose 888 per cent having hit the upper circuit 97 times since then.
Many of these stocks, which were ruling in the 50 paise to Rs 1 range, have seen prices rise to double-digit levels over the past few months despite strict vigilance by Sebi.
According to market analysts, promoters and small operators are trying to create interest in these counters to attract investors. "Investors should not get carried away by an appreciation in these stocks, as it is not based on any fundamental improvement in the companies. They should stay away from these counters as they could get trapped due to the low liquidity in these stocks if there is a reversal in market trends," said Nimish Shah, managing director, Fortune Financial ServicesBSE -4.92 %.
In 1996, 3,175 companies were traded on an average on the BSE daily. This number reduced to 1,338 in 2001. At present, 3,000 companies are traded on the BSE. Small investors, tempted by the price rise, end up risking their capital. After the price of such a stock reaches a certain level, operators start exiting in large quantities, which pulls down the scrip. As the share touches the lower circuit, small investors find it difficult to exit.
The strategy of investing in small-caps may pay off as long as the party continues on Dalal Street. As stocks change hands from one investor to another, the prices rise due to controlled supply. However, those who are left with the mid-caps at the end of the chain may suffer huge losses.
Source : RAJESH MASCARENHAS,ET BUREAU
Several penny stock counters, which remained dormant for more than a decade, have seen a pick up in activity since the past few months, with promoters and small operators trying to lure investors to these counters. Penny stocks are shares that are low-priced and enjoy a low market cap. Nearly 200 such stocks, which were never traded since 2000, have seen a resumption of trading on the BSE in the past one year.
Some of these stocks have appreciated between 100 per cent and 1000 per cent months after making a comeback, while a few of them hit the upper circuit successively over the period.
For instance, shares of Surabhi Chemicals, which commenced trading after 16 years at Rs 2.52 last year, now quotes at Rs 37.40, an appreciation of 1,384 per cent. The company, which posted a total revenue of Rs 1.2 crore in FY12, has hit successive upper circuits since resumption of trade last August.
SRK Inds, which recommenced trading after a gap of 12 years on February 13 last year, rose 888 per cent having hit the upper circuit 97 times since then.
Many of these stocks, which were ruling in the 50 paise to Rs 1 range, have seen prices rise to double-digit levels over the past few months despite strict vigilance by Sebi.
According to market analysts, promoters and small operators are trying to create interest in these counters to attract investors. "Investors should not get carried away by an appreciation in these stocks, as it is not based on any fundamental improvement in the companies. They should stay away from these counters as they could get trapped due to the low liquidity in these stocks if there is a reversal in market trends," said Nimish Shah, managing director, Fortune Financial ServicesBSE -4.92 %.
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In 1996, 3,175 companies were traded on an average on the BSE daily. This number reduced to 1,338 in 2001. At present, 3,000 companies are traded on the BSE. Small investors, tempted by the price rise, end up risking their capital. After the price of such a stock reaches a certain level, operators start exiting in large quantities, which pulls down the scrip. As the share touches the lower circuit, small investors find it difficult to exit.
The strategy of investing in small-caps may pay off as long as the party continues on Dalal Street. As stocks change hands from one investor to another, the prices rise due to controlled supply. However, those who are left with the mid-caps at the end of the chain may suffer huge losses.
Source : RAJESH MASCARENHAS,ET BUREAU
