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Today’s Market News
Stocks that have risen up to 388% in months, but
are still big no-no for you
Ever got an SMS or email from an unknown source regarding a little-known stock that
can make you a crorepati? Market experts believe most of the little-known stocks are
operated by cartels of brokers or HNIs and have very less real value.
One should be careful not to fall into such traps.
Sometimes investors get lured by such messages and invest hard-earned money on the
basis of such recommendations, and then wait for godot to recover the losses.
Generally, these shares are called microcaps, stocks whose market capitalisation is less
than Rs 100 crore.
Data shows some 54 stocks, whose individual market capitalisation is less that Rs 100
crore, have doubled their prices since the beginning of calendar year 2016. The list
includes stocks like Prime Securities, which has soared 388 per cent to Rs 28.95 on
November 16 from Rs 5.93 on January 1.
Other stocks such as Gayatri Sugars BSE -4.98 %, Agri-Tech India, Indian Sucrose
BSE 0.00 %, Vivid Global BSE 0.00 % and Tejnaksh Healthcare have soared 340 per
cent, 324.65 per cent, 270.47 per cent, 266.83 per cent and 264.33 per cent,
respectively, during this period.
Shares of DCM Financial BSE 4.44 %, Ishan Dyes BSE 5.23 % & Chem, COSYN,
Vijay Textiles BSE 0.00 %, Brushman (India), Vama Industries BSE 3.11 %, Vipul
Organics and Winsome Yarns BSE -1.96 % have surged between 170 per cent and 235
per cent since January 1 this year.
"Microcaps are driven mostly by cartel of operators. Investors should be very careful
while investing in such stocks. I never recommend such shares without meeting the
management of such companies," said Ambareesh Baliga, independent market
G Chokkalingam, Founder of Equinomics Research and Advisory, said: "We normally
call stocks whose market capitalisation is below Rs 100 crore as 'microcaps'. Most of
the microcap stocks are speculative in nature without healthy fundamentals. Investors
should avoid stocks that have no credible business and assets even if they are on a
rising spree. The risk-reward ratio is maximum in the case of micro-caps. Investors
should always maintain discipline while investing in such shares and should look at
balance sheets and annual reports of a company before taking any investment
Shares of other companies such as Manaksia Industries, Ind Bank Housing BSE -4.54
%, Techvision Ven, Source Natural, BCC Fuba India BSE 0.00 %, Kilpest India and
Pact Industries have also jumped more than 100 per cent in 2016 so far. On a year-to-
date basis, the benchmark BSE Sensex has risen marginally by 0.52 per cent to 26,298
till November 16.
Chokkalingam said the risk-reward ratio is very high in the case of such stocks. "We
collated some examples that made people crorepatis in months and then witnessed
sudden fall within a few months or sessions. For instance, the share price of Krishana
Fabrics soared 290 per cent to Rs 85.25 on October 5 from Rs 21.85 on June 6. At
present, the stock is trading around 65 per cent lower at Rs 31.25 against the October
In another case, Perfect-Octave Media Projects whose market cap is around 10 crore
surged from Rs 16.65 in February this year to Rs 39.45 this June. At present, the scrip
is trading at Rs 2.96. Like the above two, there are many other examples that showed
sudden spike and fall within a very short time.
"In some cases, investor will never recover their losses in a life time," Chokkalingam
TradeIndia Research, 301/ 3rd Floor Mangal City Vijay Nagar Indore,
Indore-452001, M.P. India.
9039060255 | 0731-6693644/844