Retail investors raise bets on penny stocks despite high investment risk

The value of equity can get wiped out as some the companies will be going through legal proceedings for debt recovery

Retail investors are placing heavy bets on penny stocks as they see limited downside on these counters. Analysts, on the other hand, warn that such bets may backfire as the value of equity in such firms could erode further due to the large quantum of debt they have.
 
“Some of these firms will be taken through legal proceedings by lenders for debt recovery. In such a scenario, the value of equity can get wiped out,” said Abhimanyu Sofat, head of research at IIFL. Penny stocks are those that trade at a market price of under Rs 10.
 
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