Fundamentally Strong Penny Stocks: Penny stocks are publicly traded companies that do get listed on stock exchanges like NSE, BSE, or any other smaller stock exchanges.
Penny stocks are stocks with low prices and low trading volume on BSE & NSE platforms. It is the infrequent participation of the stocks in trading.
You will be able to make a potential amount on your investment in times of market volatility only. Hence before making an investment, you must know about the issues connected with penny stocks.
- You must know how to determine fundamentally strong penny stocks.
- Although you can fetch benefits from penny stocks you must be aware of the risks involved in penny stocks.
- You must also know how much you should make a penny stock investment out of the allocated investment portfolio. You should know the process of evaluating the safe and secure penny stock for an investment. In case you find trouble in identifying the right penny stock then you must also know an alternate financial securities that can supplement the penny stock investments.
- There are several stock market analysts providing you with tips and cautions you should consider before making an investment in penny stocks.
- For fundamentally strong penny stocks in the Indian stock market, you must always make a careful note of every essential element before making an investment.
- However, you can learn from this information about the fundamentally strong penny stocks noticeably mentioned in June 2023.
Fundamentally Strong Penny Stocks in India 2023
The stock market experts have defined penny stocks that rock in the month of June/July 2023 and they are as follows:
- Suzlon Energy Ltd
- GMR Power and Urban Infra Ltd
- Jaiprakash Power Ventures Ltd
- Mangalam Industrial Finance Ltd
- Vodafone Idea
- Alok Industries Ltd
- Yes Bank Ltd
- Reliance Power
- Dish TV India Ltd
- Morepen Laboratories Ltd
Investment Tips on Fundamentally Penny Indian Stocks:
- You must do detailed research on the financial, operations, and management aspects of a company from which it is intended to buy stocks.
- You must make a thorough check of the following parameters like revenue growth, low debt-to-equity ratio, and profitability.
- You must evaluate the possible growth and the most likely trend an industry can go through.
- You must remember that penny stocks are volatile in the short term and hence they should be held for the long term.
- Never forget to avoid setting up a stop-loss limit to manage the risk in the investment portfolio.
- You must never invest your entire investment in a single portfolio, you need to diversify it to minimize the risk of losing money.
- You must determine the stock liquidity, and trading volume which is the deciding factor in buying/selling stocks.
- News and market trends shape the destiny of the company, any negative news can bring a change in the market volatility. Hence, you must be attentive continually.
- If you are an investor with no prior knowledge of penny stocks then you must opt for a professional financial advisor.
Features of Penny Stocks
You must understand that penny stocks are not an easy way to earn money. If you are a beginner in stock markets then you need to play cautious. However, here are some important observations you must know.
Penny Stock Price:
In the Indian context, you will find the price of the penny stock ranging between INR 10.00 to INR 20.00 and the lowest penny stock in trading can be at INR 1.00.
The penny stocks are built on small market capital and a debt issue or corporate challenges will crash the value of the stocks. The statistical analysis states that penny stocks have market capitalization from low to moderate levels.
A stock must have sufficient liquidity which allows investors to buy and sell during trading sessions. In the case of penny stocks, you will notice low liquidity that prohibits buying or selling of shares to their choice all the time.
Hence, from this, it is well understood that investing in penny stocks is a matter of high risk due to the liquidity factor.
A company with very little historical information can not provide evidence to an investor to progress for the purchase of penny stocks. You may not be furnished with the company’s operations, financial conditions, and management principles and which shall lead to chaos.
Benefits of Penny Stocks
Broadly, you can obtain three benefits when you invest in penny stocks in stock trading.
High Returns on Low Investment:
You can purchase more shares at the least price and when the stock gains you can obtain good results by selling them.
Usually, the penny stocks begin to rally when news on which these stocks depend (operating sector) begins to perform better.
Investment in Future Winners or Multibaggers
You must do thorough research on stocks that appear to be low or dead as those stocks’ performance can make them multibaggers in the future.
Being Accessible for Trading:
Penny stocks are good investments when you desire to invest and build a small corpus fund in the stock market. The low price of these penny stocks is highly attractive and is another reason for investors to buy more shares.
Risks Associated with Penny Stocks
Share Price Drop:
A sudden drop in the share price can make you lose everything you had invested before.
Buyers not Available to Buy Stocks:
If you have a huge penny stock corpus then you might not get buyers to purchase your stocks. Usually, penny stock trading experiences low trading volumes therefore it can become difficult to cash out on your stocks.
Stock Market Manipulation Can Cause Huge Loss
A penny stock may have negative news circulated and thus cause wild fluctuations in price thus avoiding investors to participate in buying and selling activity. Therefore such misleading information can disturb your portfolio performance.
Should All Invest in Penny Stocks:
Investing in penny stocks is highly risky. For any individual to invest in penny stocks, it is important for them to gather complete information about the company they are investing in and also keep a close eye on the information relating to the company’s growth projections.
Penny stocks are not advisable for beginners as they may not completely understand the risks associated with such investments. Penny stocks are best traded by seasoned investors who have a good grip over market speculations and invest after thorough analysis and research.
What is an alternative to investing in Penny stocks?
The best alternative to investing in penny stocks is mutual fund investments, which are professionally managed and help investors create a diversified portfolio across asset classes such as shares, bonds, and money market instruments.
How to play safe when buying penny stocks?
Though investment in penny stocks attracts huge risk, it is still advised to invest not more than 5 percent to 10 percent. A right diversified investment can offset the losses in penny stocks by investing in another asset class.
How to Select a Company to Buy Penny Stocks?
Penny stocks when belonging to the subsidiary stock of a larger capital company is the right place to park your investment.
A loss of penny stock can be adjusted by the parent company in the form of paying debts and rectifying technical issues.
For example, Vodafone Idea company is a subsidiary of Aditya Birla Group and the company can help Vodafone Idea in times of crisis.
Banks and other financial agencies can provide financial impetus to forgo debts if any and work towards progress.