Mumbai, January 13: The stock market landscape in the country is witnessing rapid growth in demat accounts; however, a recent report by Motilal Oswal stated that the penetration remains significantly lower compared to global standards. It is also learned that the number of demat accounts nationwide reached approximately 179 million recently, thereby doubling from 90 million in the Financial year 2022. While a demat account is mandatory to invest in the Stock Market in the country, it's important to know the different types of stocks that exist in the market, including penny stocks.

Penny stocks are typically issued by small, unproven companies with limited financial resources. As a result, they can be highly volatile and subject to large price swings. Penny stocks can be a tempting investment option for some investors due to their low price and potential for high returns. However, it is important to be aware of the risks involved before investing in penny stocks.

What Is a Penny Stock?

Penny stocks are shares that are very low-priced, mostly under INR 10 and INR 20 per share. In simple terms, penny stocks are stocks that trade at a very low price in stock markets. Penny stocks are usually listed on a smaller exchange. In the Indian stock market, penny stocks are estimated to have prices below INR 10. In contrast, shares that trade below USD 1 in the Western markets are usually called penny stocks. Stocks To Buy or Sell Today, January 13, 2025: Avenue Supermarts, Tech Mahindra, and JSW Steel Among Shares That Are Likely to Remain in Focus on Monday.

However, the basket also includes stocks priced under USD 5. Penny stocks are very speculative and considered highly risky due to their lack of liquidity, small number of shareholders, limited disclosure of information, etc.

Know Risks and Rewards of Investing in Penny Stocks

Although penny stocks are extremely volatile, they have the potential to produce extraordinary gains and deliver rapid growth in a short period of time. Investing in this type of stock in small amounts can help an investor make significant profits. However, Penny stocks are also risky to invest in because they are low in liquidity. They are also prone to price manipulations, sudden delisting, and regulatory scrutiny. Groww IPO: India’s Largest Retail Stockbroker Planning Initial Public Offering Valued at USD 6–8 Billion, Say Reports.

How To Trade in Penny Stocks?

Additionally, Penny stocks, which are ideal for new beginners, are also prone to scams, as they are mostly not regulated by a national-level stock exchange. So, how can one trade in Penny stocks? To trade and invest in Penny stocks, one needs to register with a stock broker online using their valid ID proof and PAN card and make an initial deposit.

Disclaimer: The views and recommendations above are those of experts, not of LatestLY. We advise investors to check with certified experts before making any investment decision.

(The above story first appeared on LatestLY on Jan 13, 2025 04:26 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).