15 highly risky ‘Bhangaar stocks’ that surged up to 350% in 2016

NEW DELHI: If wealth creation from the equity market is tough, making money in penny stocks is tougher.

Yet, rain or shine, there is no dearth of money spinners within this basket of stocks.

Consider this: More than 15 penny stocks doubled investor wealth in 2016, when the benchmark equity indices struggled to stay in the positive for most part of the year.

Stocks that trade at below Rs 10 are called penny stocks, or Bhangaar stocks.

Among these, DCM Financial tripled investor wealth in 12 months flat, as the scrip surged from Rs 1.15 on December 31 last year to Rs 4.75 on December 26. Others such as MPS Infotechnics (up 275 per cent), Gayatri Sugars (up 269 per cent), GSL Nova Petro (up 250 per cent), Frontier Info (up 180 per cent) doubled investments.
The list also includes Winsome Yarns, Ajel, Haria Exports and Filmcity Media, which rallied 165 per cent, 145 per cent, 107.70 per cent and 107 per cent, respectively, during the year.

The problem is penny stocks are highly unreliable and this kind of returns comes at great risk.

Before investing in these stocks, one has to be adept in differentiating between quality and speculative stocks. Many of these stocks tend to be operators-driven due to low liquidity, thus creating a veritable minefield.

But investors who dared to bet many of such shares are today sitting on healthy profits.

“Conservative investors should not go for stocks trading below Rs 10, as they fall in the penny stock category. Only speculative traders can enter such stocks, as there are many examples of such stocks getting suspended from the exchanges,” said G Chokkalingam, Founder, Equinomics Research and Advisory.

Vijay Kedia, MD, Kedia Securities, once called them ‘Bhangaar stocks’. "There are three market-caps in the stock markets - largecap, midcap and smallcap. But there is another cap, known as ‘Bhangaar cap’,” he said.

Over the past two years, some of the penny stocks have multiplied investor wealth up to five times.

Shares of Alps Industries have rallied from Rs 1.55 in December 2014 to Rs 8.27 as of December 26 this year. Other penny scrips like Biofil Chemicals, DCM Financial, and Century Extrusions have advanced 250-350 per cent over the past two years.