Penny stocks promise 400% returns — but should investors take the bait?  

Penny stocks—typically priced under Rs 100—have always lured investors with the promise of big returns at minimal cost. But are these bargain stocks true wealth builders or just traps in disguise?

In 2025, amid political churn, volatile markets, and global unrest, several low-profile Indian penny stocks have staged a surprising rally. Despite headwinds like Trump-era trade shocks and regional instability, companies such as Srichakra Cement, Omansh Enterprises, and Swadeshi Industries have delivered jaw-dropping returns of 250–400% for bold investors.

Investment expert CA Nitin Kaushik explained the appeal lies in their low cost and massive upside potential. “Investors are drawn to these stocks thinking they’ve found a hidden gem. A Rs 5 share doubling to Rs 10 means 100% returns—very tempting,” he said on social media.

The penny stock playbook

Investing in penny stocks presents an intriguing opportunity for investors. These stocks are available at a budget-friendly price in the market, sometimes even below ₹10. Typically issued by small-cap companies, penny stocks are easily accessible to a wide range of investors looking to diversify their portfolios without a significant capital outlay.

However, it's essential to be aware of the inherent risks associated with penny stocks. Their prices are highly volatile, with potential for substantial fluctuations driven by low trading volumes and market dynamics. While this volatility can result in significant gains, it also poses a risk of substantial losses.

Prices can spike or crash dramatically in short spans, driven by low volumes and sentiment. That same volatility that fuels profit also drives losses.

Another key challenge is liquidity—it’s often hard to exit or enter positions without moving the price significantly. This makes quick trades tough, especially during panic selling or sharp rallies.

Kaushik warned that lack of transparency is another red flag. “Many penny stock companies don’t disclose enough financial data. Some may be in bad shape or operating in no-growth sectors,” he added.

Experts say penny stocks suit only high-risk investors. They advise allocating only what you can afford to lose, and never chasing low prices blindly. Research, diversification, and a clear exit plan are non-negotiable.

Bottom line: The right penny stock can turn into gold—but the odds of striking it rich remain slim.