’Dangerous’ bets: Indian investors rush into penny stocks below ₹5
4 years, 5 months ago

’Dangerous’ bets: Indian investors rush into penny stocks below ₹5

Live Mint  

India’s retail investors are leaving their mark on a risky corner of the nation’s $1.9 trillion share market: penny stocks. “Investors are ignoring the rising virus cases, high valuations and banking on hopes of things going back to normalcy in the next few quarters,” said Rusmik Oza, head of fundamental research at Kotak Securities Ltd. “In this scenario, investing in penny stocks is the most dangerous thing to do.” India surpassed Spain’s death toll from the pandemic this week, and its economy is set for its first contraction in more than four decades. More than 2.6 million new accounts have been opened with the Central Depository Services Ltd. since March, including a record 830,405 in June, according to data from the Mumbai-based share depository. Trading volumes in the U.S. for the broader penny stock market have jumped to a two-year high as speculative options bets surge and investors pile into insolvency stocks the likes of Hertz Global Holdings Inc. and Whiting Petroleum Corp. Back home, stocks with “zero equity value” such as GTL Infrastructure Ltd., Suzlon Energy Ltd. and Jaiprakash Associates Ltd. have more than doubled since April, said Nirali Shah, a senior research analyst at Samco Securities Ltd.

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