There are a host of investment options available in the market. Penny stock, for example, is one of these options. As the name suggests, penny stocks are issued by small publicly-traded companies listed on stock exchanges. These are the relatively affordable stocks available for a price lower than Rs. 10 which makes them suitable for new investors. Not only residents, but NRIs can also invest in penny stocks in India. Here we will list the best penny stocks to buy in India in 2022.
Penny stocks have minimal trading volume and are low on liquidity, but they can yield profits when you sell them at a higher price. They are very popular with small investors in India. However, they can’t be suitable for all investors due to limited liquidity.
Best Penny Stocks to Buy in India in 2022
Listed below are the 10 best penny stocks traded on stock exchanges in India:
| S. No. | Company Name | Industry |
|---|---|---|
| 1. | Suzlon Energy Ltd. | Manufacturing |
| 2. | South Indian Bank | Banking |
| 3. | Vodafone Idea Ltd. | Telecom |
| 4. | Mahabank | Banking |
| 5. | Indian Overseas Bank | Banking |
| 6. | Yes Bank | Banking |
| 7. | Morepen Laboratories Ltd. | Pharmaceutical |
| 8. | Alok Industries Ltd. | Textile |
| 9. | Jammu & Kashmir Bank Ltd. | Banking |
| 10. | Bank of Maharashtra | Banking |
Factors to Consider When Investing in Penny Stocks
The low price of penny stocks makes them almost risk-free to try your luck in the stock market. However, a penny investor should take the following factors into consideration before investing in these assets.
Low Liquidity
Since penny stocks are publicly traded stocks of small companies, they don’t have the same liquidity as large companies. As a result, you may not find buyers when you wish to sell them because buyers are not always available.
High Return Potential
In India, penny stocks tend to deliver above average returns on investment as compared to other assets like mutual funds and equity shares. However, it is necessary to be diligent in your research and diversify your portfolio to hedge against potential risk associated with higher return prospects of penny stocks.
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High Risk
The potential for higher returns is accompanied by increased risk on investment in penny stocks. Penny stocks are speculative and can offer higher returns as well as losses. Hence, you should start investing with a small amount and gradually increase your investment over time.
Low Cost
Penny stocks of listed companies are traded on stock exchanges for a price lower than Rs. 10. Before investing in such stocks, you should sort them based on their fundamentals and pricing. Buy penny stocks that are priced in their lower ranges to mitigate the losses and improve your chances of making windfall gains.
Avoid Buy and Hold Approach
In case of penny stocks, you should avoid a buy-and-hold strategy. They have potential to deliver quick growth in a short period of time. Therefore, you can buy them for short periods and let them mature before reinvesting. Thus you can reduce the risk level significantly.
Penny stocks are not frequently traded stocks and the returns on them that investors can get potentially depend on the market volatility.
Note: A Demat account is not mandatory for NRIs to invest in mutual funds in India. NRIs can download SBNRI App to choose from 3000+ mutual fund schemes in India or to ask any questions related to mutual fund investment.
NRIs willing to invest in penny stocks in India must consult market experts to make informed decisions. You can get detailed mutual fund advisory from experts at SBNRI. You can download SBNRI App from the Google Play Store or App Store to ask any questions related to mutual fund investment, NRI account opening online and tax filing in India. To ask any questions related to Mutual Funds, click on the button below. Also visit our blog and YouTube channel for more details.
FAQs
Yes NRIs can also purchase/ sell penny stocks of Indian companies on stock exchanges under portfolio investment scheme. They need to have a PIS account for investment on a repatriable basis through an NRE account. They can also use their Indian funds from an NRO account to invest in stocks.
You need to have a Demat account for trading in penny stocks. You can start trading in penny stocks using an online trading platform or app.
While penny stocks tend to deliver above average returns on investment as compared to other assets, it is not necessary you would always make good returns. These stocks are not frequently traded stocks, and even risk being completely wiped out. The returns on them that investors can potentially get depends on the market volatility.
As compared to other investments, penny stocks carry the highest risk due to low liquidity. Because you may buy a penny stock at a low price but it is difficult to find buyers in an emergency. Some of such stocks die out over time and potentially get delisted. Due diligence is compulsory before investing in penny stocks.
