Many investors are making a quick killing in penny stocks. One investor was narrating, how he bought shares of RCOM at Rs 12 and managed to sell the same at Rs 32, after a deal with Reliance Jio for sale of asset was announced.
Vakrangee Limited is a classic case. In 2009, this stock was traded at Rs 9. You know, if you had to buy 1000 shares, at most your loss would be Rs 9,000, but, the profits has no limit.
Vakrangee in early 2018, hit a high of Rs 555, giving whopping returns. There are many investors, who play penny stocks, after there is adverse news in them.
Gitanjali Gems is a classic case. The stock at Rs 2.50, gave an almost zero investment risk. It is now locked at the upper end of the circuit filter at Rs 4.50 and can easily double money in just 5 trading sessions.
There are many investors, who buy such stocks and make a killing, with limited downside risk. There is one investor, who is now eagerly tracking Vakrangee and is waiting for the stock to come-out of the lower circuit filter.
However, suffice to say that you cannot always make profits. You might end-up losing money as well, but, the whole point is that there is such limited risk and money involved.
Kitex Garments, Mayur Uniquote, Symphony were all trading at dismal levels of Rs 25 to Rs 50 and have turned multibaggers. Having said that, it is like searching "needle in a haystack" to identify such companies. However, you can look at stocks that are successfully hitting the lower circuit on some adverse news and then see if small quantities that can be bought into.
These stocks tend to have limited risk, as it takes small amounts to buy them, but can make money even faster. Of course, we are not advocating buying penny stocks and stocks that are fundamentallly unsound. You need to be very careful.