150 penny stocks gain up to 2000% since last April! Sebi gets into action as brokers suspect pump and dump

A recent crackdown by market regulator Securities and Exchange Board of India (SEBI) on suspected pump-and-dump action on Dalal Street has made many rethink the consequences of bagging inexplicable bumper returns through penny stocks. Penny stocks — a term having originated from Wall Street — are stocks that trade at a low price, have low market capitalisation, are mostly illiquid, and are usually listed on smaller exchanges.

According to Zee Business research, the suspicious rally in as many as 150 penny stocks of negligible businesses between 200 per cent and 2,000 per cent since April 1, 2022 has raised concerns. The 150-odd companies are either unknown or do not have any proper earnings record, the research shows.

For instance, Soft Track Venture Investment’s stock has given a return of 21 per cent since November 2022 and stock’s price to earnings ratio is 371 times but the company’s revenue is hardly Rs 15 lakh to Rs 20 lakh. 

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समझिए Penny शेयरों का मायाजाल इस वीडियो में

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In another instance, Shree Gang Industries’ stock has given 100 per cent return from April 2022 to September 2022 but its book value per share is negative Rs 30.3 

The third suspicious case is of Bohra Industries which is a loss-making company but the stock has doubled.

Companies such as Mercury Metals, S&T Corp, Karnavati Finance, K&R Rail Engineering, Taylormade Renew, Ascom Leasing, and Regency Ceramics also gained over 1,000 per cent this year.

The report stated that many brokers have agreed that the activity in many of these stocks remain suspicious despite a Securities and Exchange Board of India (SEBI) crackdown as they have historically been part of stock market operators' pump-and-dump schemes and a route to launder money. 

Zee Business Panelist, Sandeep Jain and Rakesh Bansal have also cautioned investors against such stocks and have recommended to do proper research before investing in any company’s stock. 

SEBI’s action on pump and dump of stocks 

Recently, SEBI took action against people who pump and dump through YouTube. Action was taken against 45 people who pumped and dumped in Sadhna Broadcast and Sharpline Broadcast.

In FY19 also SEBI had booked over 10,000 people for trading in illiquid stock options.

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