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.

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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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