Penny stocks ride the boom to new highs

Hectic buying by foreign funds is having its impact on penny stocks too. Proof is in the reduced number of stocks trading below their face value. Moreover, some of these stocks now have amazing valuations.

A dealer at a local brokerage house said, "Most of these stocks have started moving up in line with the broad market, in the anticipation that buying interest in these stocks will pick up gradually."

And the buying interest of retail investors in these stocks is so strong that it is very difficult to find a small capitalisation stock below Rs 20-25 levels, he added.

Of the total 703 penny or small capitalisation stocks which traded below their face value at the beginning of the year, as many as 242 are now trading much higher.

In fact, the appreciation in stock prices of some of these stocks is more than a 1,000 per cent. In the last 12 months, these 242 stocks have posted an average return of 122.50 per cent till December 24, 2003.

But the biggest surge has been in 27 stocks which have risen in the range of 501 per cent and 2,100 per cent.

Further, 153 stocks have rallied between 101 per cent and 500 per cent and 44 stocks, between 51 and 100 per cent and 154 stocks have appreciated between 1 per cent and 50 per cent in the rest.

Most of these stocks which have rallied include the second-rung stocks in the information technology, textile, pharmaceuticals, steel and the engineering sectors.

The market capitalisation of these 242 stocks increased by 247.71 per cent or Rs 20,998.00 crore (Rs 209.98 billion) in calendar 2003, from Rs 8,476.81 crore (Rs 84.768 billion) on December 31, 2002, to Rs 29,474.81 crore (Rs 294.748 billion) on December 24, 2003.

The biggest gainer in the rally has been Polychem surging by 2,117.90 per cent to Rs 31.05 on December 24, 2003.

The stock traded at mere Rs 1.40 on December 31, 2002.

Bhansali Engineering has rallied 1,983.10 per cent to Rs 166.65 during the same period.

Soni Infosys has climbed up from mere Re 1.00 to Rs 14.01, up 1,301.00 per cent. Transgene Biotek has edged up 1,203.30 per cent to Rs 79.50. Torrent Cables has climbed 1,101.70 per cent to Rs 70.90 and VBC Ferro Alloys has jumped 1,031.60 per cent to Rs 87.70.

The Sensex closed on Tuesday with a solid gain of 77.59 points at 5,641.92, its best close since March 1, 2000.

The NSE S&P CNX Nifty also added 28.40 points to end above the 1,800-mark at 1,808.70, its highest ever close.

For the year 2003, the Sensex has risen 2,278.27 points, or 67 per cent, making it one of the best performing indices in the world.