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Business News/ Market / Stock-market-news/  Lesser-known stocks ride the bull run
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Lesser-known stocks ride the bull run

Penny stocks, which may not have the fundamentals to power their rise, have caught the fancy of traders

There are at least 27 stocks which have not just doubled or trebled, but gained over 1,000% in 2014. Photo: MintPremium
There are at least 27 stocks which have not just doubled or trebled, but gained over 1,000% in 2014. Photo: Mint

Mumbai: In every market rally, there is a whole set of stocks which ride the wave, including lesser-known penny stocks which may not have fundamental reasons powering their rise. These stocks may not be favoured by long-term and serious investors, but often rather catch the traders’ fancy.

This rally is no different.

In 2014, BSE’s benchmark 30-share Sensex rose 29.9%, while the mid-cap and small-cap indices jumped 54.7% and 69.2%, respectively. But there are at least 27 stocks which have not just doubled or trebled, but gained over 1,000% in 2014. One such stock rose 10,000% in the last one year. The reasons for this surge are unkown.

This analysis looked at returns on all BSE-listed stocks in the last one year. In cases where stocks were not traded as of end of December 2013, the last traded price prior to a year has been considered for uniformity in calculations.

“The problem with investors is they feel they are left out. Then, they go hunting for small-value stocks. They are suddenly interested in useless stocks," said Deena Mehta, managing director of Asit C. Mehta Investment Interrmediates Ltd.

“This is like the high tide that brings along with it a lot of garbage. One needs to see the merits in the company before investing," added Mehta, a veteran in the equity markets.

Among the stocks which have gained the most is Ratnagiri-based Kesar Petroproducts Ltd, which saw its shares jump more than 9,100% in 2014. Over a 12-month period until 28 January 2015, the stock has gained 12,000% and closed at 107 on BSE on Wednesday. Data from BSE suggests that the stock was not traded between September 2006 and June 2014; however, trading volumes picked up after that.

“Kesar was a sick company," said Manali More, compliance officer at Kesar Petroproducts in response to an email seeking comments on the rise in the stock price. “Now, the new management has restored the company by paying off all the bank dues, infusing new capital for business, and starting a new product in the company, which will slowly build up as we utilize the capacity of the plant," More added.

For the quarter ended September 2014, the company reported a 26.7% increase in net profit to 1.9 crore.

Other stocks which saw huge gains in 2014 are White Lion Asia Ltd, formerly known as Bombay Talkies Ltd, which has jumped more than 7,500%. The company is a non-banking financial services firm. According to its results posted on BSE, the company reported a net revenue of 5 lakh for the September quarter, compared with 1.94 crore in the corresponding quarter last year. The net profit figure for the company was not available on BSE for the September 2014 quarter.

An email sent to White Lion Asia company was not answered.

Another stock, Shantanu Sheorey Aquakult Ltd gained more than 4,900% in 2014. However, according to BSE website, the stock has now been “suspended due to penal reasons." Cyrus Bhot, director and compliance officer declined to comment on the reasons for the stock’s rise or its suspension.

Information available on BSE shows that the company is in the packaged food industry and reported a net profit of 19 lakh for the September 2014 quarter compared with 21 lakh in the corresponding quarter last year.

There are others.

Kamalakshi Finance Corp. Ltd saw its shares rising over 4,700% in 2014, while Mumbai-based Omega Interactive Technologies Ltd’s shares have surged from 0.76 in September 2013 to 112.50 on 28 January 2015. The shares, however, were not traded between September 2013 and May 2014.

In the case of Omega Interactive, the company underwent a reduction and consolidation of share capital that was announced in September 2013, and to that extent, the price has not been adjusted. The company also merged two private companies with it in 2014.

When contacted by email to understand the reasons for the price rise in the stock, there was no response from the IT software products company. When the phone number listed on BSE website was called, Mint was told that the company had shifted from the place more than a year ago.

Kamalakshi Finance Corp. also did not respond to a mail sent.

“There are different reasons for which some penny stocks give huge return in a rally. One of them could be low liquidity leading to high level of appreciation in a market uptrend," said Deven Choksey, managing director and chief executive officer of KR Choksey Shares & Securities Pvt. Ltd, adding that usually, such companies have low floating stock and market capitalization.

“Also, it could be a genuine case where a company has turned around its business, though observations so far say that genuine cases are few and far between," said Choksey, adding manipulative activities in stock markets have come down.

Mehta, however, cautions that retail investors must remain alert while investing in lesser-known stocks.

Mehta notes that while the biggest rallies often come in small and mid-cap stocks, it is difficult for a retail investor to choose stocks, adding that investors need to seek professional advice from wealth managers or invest through mutual funds.

She explained that people think that there is not much to lose while investing in a 50-paisa stock and invest without much research.

“They start punting in stocks about which they know nothing. Even if you caution people and tell them you will lose your money 100%, they still invest," said Mehta.

“It is 100% about greed and low downside risk," she added.

Ravindra Sonavane and Ashwin Ramarathinam contributed to this story.

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Published: 29 Jan 2015, 01:15 AM IST
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