Everyone dreams of becoming rich quickly through the stock market and Investment. Many new investors search for cheap shares that can multiply their money in a short time. While scrolling through stock apps or YouTube videos, they often come across names like “hidden gems”, “next multibagger”, or “penny stocks under Rs 10.”
These terms sound exciting — after all, who wouldn’t want to buy thousands of shares for just a few thousand rupees? But before you fall for the “cheap share” trap, it’s important to know what penny stocks really are and why they are considered high-risk investments.
What Are Penny Stocks?
Penny stocks are shares of small or micro companies that trade at a very low price — usually below Rs 50 (sometimes even below Rs 10).
These companies are either new, struggling financially, or have very limited business operations.
In India, penny stocks often belong to SME-listed companies (Small and Medium Enterprises) or firms with very low market capitalization. They are not as well-known as large companies like TCS, HDFC Bank, or Reliance Industries.
Example: Suppose a company’s share is priced at Rs 5. You buy 1000 shares for Rs 5000.
Now you start thinking — “If it goes from Rs 5 to Rs 10, my Rs 5000 will become Rs 10,000!”
This thought excites many beginners. But in reality, most penny stocks never reach that level. In fact, many of them lose 50–90% of their value over time.
Why Penny Stocks Are Not Safe Investments
Here are the main reasons why penny stocks are highly risky and not considered safe for most investors.
1. Lack of Transparency
Most penny stock companies do not have proper financial records or audited reports. Their business information is not easily available, and sometimes even their management background is unclear.
Without proper data, investors cannot judge whether the company is doing well or not. This lack of transparency makes them extremely risky.
2. Low Liquidity
- Liquidity means how easily you can buy or sell a share in the market.
- In penny stocks, there are very few buyers and sellers.
- So, even if you want to sell your shares, you may not find anyone ready to buy them.
- As a result, you might get stuck with those shares even when prices are falling.
3. Price Manipulation (Pump and Dump)
This is one of the biggest dangers of penny stocks.
Some people (called operators) buy a huge number of cheap shares and then spread fake news or hype to attract small investors. When prices rise artificially, they sell all their shares and book profits — leaving retail investors with big losses.
This trick is known as the “pump and dump” scam.
4. Weak Fundamentals
Most penny stocks belong to companies with weak or unstable business models. They might be in loss, have huge debt, or operate in uncertain industries. Their future is unpredictable, and many of them even shut down after a few years.
So even if the stock price goes up temporarily, it usually doesn’t sustain.
5. Less Regulation and Oversight
- Small companies do not get the same level of monitoring from SEBI or stock exchanges as large companies do.
- Because of this, frauds and manipulations are more common in penny stocks.
- Once such companies are caught or delisted, investors lose everything.
Examples of Penny Stocks That Have Lost Big in 2025
To understand the risk better, let’s look at some real-life examples of penny or microcap stocks that have faced huge losses in 2025.
(Note: This data is for educational purposes only, not for investment advice.)
1. TV Vision Ltd
- Once a hot favourite among retail investors, TV Vision was considered a “hidden gem” by many.
- However, in 2025, it lost nearly 78% of its market value.
- The stock price fell drastically, and those who entered late ended up in heavy losses.
2. SAB Events & Governance Now Media Ltd
- This media company once showed good returns, but by 2025 it crashed around 73%.
- The company’s weak business performance and poor earnings made investors lose confidence.
3. Noida Toll Bridge Company Ltd
- This stock has been in news for years but has failed to deliver steady growth.
- In 2025, it lost nearly 69% of its value, turning into a classic example of a penny stock gone wrong.
4. Williamson Financial Services Ltd
- Once a promising microcap stock, Williamson Financial Services also faced a 69% decline in 2025.
- Poor fundamentals and low investor interest were major reasons behind its fall.
5. Pradhin Ltd
- This microcap company has been continuously falling, recently touching its 52-week low.
- It saw a 32–35% decline in just a few months.
6. Ashirwad Steels & Industries
- Rated as a “Strong Sell” by analysts, this company’s share has dropped close to its 52-week low.
- It highlights how small-cap industrial firms can easily lose value when business conditions worsen.
7. SBC Exports Ltd
- Even though this company had some business activity, its stock fell about 30–38% in 2025.
- Investors who expected it to double their money faced the opposite result.
8. Jai Corp, Orchid Pharma, Jai Balaji Industries
- These are other examples of small/microcap stocks that saw massive declines between 40% to 70% in 2025.
- Many retail investors are now trapped in these shares, waiting for a recovery that might never come.
Why Do People Still Invest in Penny Stocks?
Despite all the warnings, penny stocks still attract many investors. The main reasons are:
- Low Price Temptation: People believe low price = less risk. But that’s not true. Cheap doesn’t always mean valuable.
- High Return Dream: Everyone wants to find the “next multibagger” - a stock that can turn Rs 10,000 into Rs 1 lakh.
While this is possible, the chances are extremely low.
- Lack of Knowledge: Many beginners don’t understand how stock markets work. They get influenced by social media tips or fake “stock gurus.”
- FOMO (Fear of Missing Out): When others boast about profits, people rush to buy without checking fundamentals.
When (and How) to Invest in Penny Stocks
If you still want to invest in penny stocks, do it carefully and strategically.
Here are a few important tips:
- Invest only a small portion of your money (1–2% of your portfolio).
- Never put all your savings in penny stocks.
- Do deep research — check company financials, business type, promoters’ background, and debt level.
- Avoid tips from unknown YouTube channels, Telegram groups, or WhatsApp messages.
- Most of them are created to manipulate prices.
- Choose only those penny stocks that show consistent profit growth, low debt, and genuine products/services.
- Have patience and realistic expectations.
- Don’t expect to become a millionaire overnight.
Safer Alternatives for Beginners
If you are new to investing, it’s better to start with safer and more stable options:
- Large-cap / Blue-chip Stocks - like TCS, Infosys, HDFC Bank, or ITC.
- Index Funds or ETFs - like Nifty 50 or Sensex funds that give steady long-term returns.
- Mutual Funds (SIP) - professional fund managers handle your money.
- Government Bonds or Fixed Deposits - less risk, steady returns.
These may not double your money in a month, but they protect your capital and help you grow wealth safely.
What Do Investors Say? Hold or Sell?
As of 2025, most experienced investors and market experts believe that penny stocks are not suitable for long-term holding unless you have done thorough research.
- Many investors who bought penny stocks in 2023–24 are now facing 50–80% losses.
- Some are still holding, hoping for recovery, while others have already exited with losses.
- Experts suggest it’s better to book small losses early rather than wait for a complete collapse.
- If a penny stock company’s fundamentals, sales, or profits are not improving, selling is a wiser decision.
| Point | Description |
|---|---|
| Definition | Penny stocks are low-priced shares (below ₹50) of small or micro companies. |
| Risk Level | Very high – due to low liquidity, weak fundamentals, and manipulation chances. |
| Returns | May give short-term profits, but most end up in loss. |
| Examples (2025) | TV Vision, SAB Events, Noida Toll Bridge, Williamson Financial, Pradhin, etc. |
| Safe Option | Large-cap stocks, mutual funds, index funds. |
| Advice | Do proper research, invest small, and avoid blindly following tips. |
Conclusion
Penny stocks look attractive because of their low prices, but in reality, they are high-risk, low-transparency investments.
While a few may become multibaggers, the majority end up causing heavy losses.
If you are a beginner, it’s best to focus on strong companies with solid financials instead of gambling on unknown names.
Remember — slow and steady growth is better than risky shortcuts.
Disclaimer: This article is for educational purposes only. It does not provide any kind of investment advice or stock recommendations. The stock market is subject to risks. Always consult your financial advisor before investing.