What Are Penny Stocks in India
Written by Pradnya Surana
3 min read | Updated on November 20, 2025, 15:16 IST
In family gatherings, on some social media platforms or at times even on news channels, we have all heard the fascinating stories, grandfather bought shares for a few hundreds and now it is worth lakhs!
Many begin investing in the stock market with this story as a motive. When it comes to stock market investing, the allure of turning small investments into large fortunes is irresistible. In India, penny stocks represent that very dream. Buying inexpensive shares that could multiply manifold over next few years.
But wait, these inexpensive penny stocks can quickly crash, their issuing companies might shut down as well and in the process you can lose significant money. Inexpensive shares that hold the potential to multiply many times over. But just as quickly as they can rise, penny stocks can crash and burn, erasing your money overnight. It’s important to understand about penny stocks before you take plunge here
What exactly are penny stocks?
In simple terms, penny stocks are shares of small companies that trade at a very low price, usually below ₹10 per share. They often belong to firms with small valuations, usually under ₹500 crores. They are usually traded on smaller exchanges or in low volumes.
Unlike large, well-known companies listed on the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange), penny stocks are generally found on the BSE SME (Small and Medium Enterprises) platform.
The name ‘penny stock’ comes from the American markets, where such stocks are literally worth a few pennies.
Why investors are attracted to penny stocks
Penny stocks attract investors for several reasons, like
Low entry cost
With prices often under ₹10, even a small investment can buy thousands of shares. These low prices attract many investors especially, new ones.
Potential for massive returns
Yes, low investment, huge returns. There are stories of small companies whose shares went from ₹2 to ₹200 over a few years. For example, companies like TTML (Tata Teleservices Maharashtra Ltd) and Suzlon Energy whose share price was below ₹10 have witnessed this massive gain.
Psychological appeal
There is a sentiment that ₹2 stock can quickly become ₹4, that ₹2000 worth stock will become ₹4000. The difference in appeal is ₹2 journey and ₹2000 journey, though the fundamentals of price change remain same. Prices will only double or rise when business grows in that proportion.
Risks of investing in penny stocks
Despite the dream of high returns, penny stocks are one of the riskiest investments in the equity market. Here’s why,
Lack of information
Lack of information Most penny stock companies are small, not popular and not many analysts follow them. Their financials may not be audited or not available. Given their small valuation, financials can be easily manipulated. This makes it hard to assess their true value.
Low liquidity
Many penny stocks trade in very small volumes. If you ever want to sell, you may not find enough buyers. This lack of liquidity can trap investors during downturns.
Price manipulation
Penny stocks are many times the target of ‘pump and dump’ schemes. Operators artificially inflate the price by spreading rumours or false news. These false news are spread to change prices as per operators convenience which can be loss making for retail investors.
Weak fundamentals
A low share price is often due to weak business fundamentals like high debt, low profitability or poor management. While some small firms can turn around, most never do.
Regulatory oversight
Although SEBI (Securities and Exchange Board of India) regulates all listed stocks, the smaller the company, the harder it is to monitor every detail. As a result, frauds are more common in this segment.
How to identify genuine opportunities
Not all penny stocks are worthless. Some are genuine small-cap companies in their early growth phase. Apply these filters to sort out genuine companies worth investing.
Check the financial health
Look for consistent revenue growth, manageable debt and positive cash flows. Avoid firms with unclear or outdated financial statements.
Understand the business model
Invest only in companies whose products, market and competition you understand.
Management track record
Research the company’s promoters and board of directors. Have they been involved in past controversies? Do they hold a significant personal stake in the company?
Volume and price trends
Sudden spikes in price or volume without clear reasons for it should raise suspicion. Be cautious of such movements.
Regulatory compliance
Ensure the company you are investing in files regular disclosures with the exchange and adheres to SEBI norms. Lack of transparency is a major red flag.
Examples of Indian penny stocks that turned around
There are rare success stories that keep investors hooked. For instance,
TTML (Tata Teleservices Maharashtra Ltd) traded below ₹5 for years before reaching above ₹100 during the 2021–22 bull run, fuelled by expectations around telecom digitisation.
Suzlon Energy, once bankrupt, saw a revival after restructuring and a renewable energy push. It handsomely rewarded its investors.
However, there are hundreds of penny stocks that have disappeared from the market altogether. So it's important to check the worth.
Final thoughts
Penny stocks in India represent both the promise and peril of stock market investing. They can turn small sums into fortunes or wipe them out just as quickly. Success in this segment depends less on luck and more on due diligence, financial discipline and understanding market psychology.
About Author
Pradnya Surana
Sub-Editor
is an engineering and management graduate with 12 years of experience in India’s leading banks. With a natural flair for writing and a passion for all things finance, she reinvented herself as a financial writer. Her work reflects her ability to view the industry from both sides of the table, the financial service provider and the consumer. Experience in fast paced consumer facing roles adds depth, clarity and relevance to her writing.
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Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.