Microcap stocks defy market: 50 stocks rise over 200% amid selloff; analysts caution over poor earnings, bubble risk
Even as benchmark indices have struggled since the September 2024 selloff, a clutch of little-known microcap and penny stocks have delivered blockbuster returns, with at least 50 companies gaining over 200%—and some surging by as much as 5,500%, according to an Economic Times report.Leading the list is RRP Semiconductor, a Maharashtra-based firm whose shares skyrocketed from Rs 50.6 to Rs 2,833, translating into a 5,500% jump in under 11 months, according to an ET report. The company’s market capitalisation rose from Rs 68.9 crore to Rs 3,858.5 crore, despite posting only Rs 32 crore in revenue and Rs 8.5 crore in net profit for FY25.Penny frenzy amid broader correctionThe meteoric rise in these counters comes at a time when broader indices have seen a correction. Since September 27, 2024, the Nifty Smallcap 250 and Nifty Midcap 150 indices are down 3% and 1.8%, respectively, while the Nifty Microcap 250 has fallen 4.8%.Among other top gainers are Elitecon International, Sumeet Industries, Vega Jewellers, Midwest Gold, Kothari Industrial Corporation, Arunis Abode, and Rajasthan Tube Manufacturing, with returns ranging from 1,000% to 4,800%.
Top Performing Microcap & Penny Stocks Since Sept 27, 2024
(Figures in Rs crore)
Source: ET reportHowever, ET reported that 12 of the 50 stocks had reported net losses in FY25, and 19 had revenues below Rs 10 crore—raising concerns over fundamental weakness despite massive market cap expansion.‘Mini-bubble’ fears as Sebi caution still loomsExperts are warning retail investors to tread cautiously. “One could say that it is a mini-bubble in a group of penny stocks, and one should be extremely careful not to get trapped with their core investment corpus in such stocks,” said Vikas Gupta, CEO, OmniScience Capital.He noted that many traders are lured in by rumours of asset monetisation or future business potential, often unsupported by operational strength.“Sebi had cautioned investors last year about price manipulation in SME and microcap counters, and those risks haven’t gone away,” said Apurva Sheth, Head of Research, Samco Securities.Sheth added that only 8 of the 50 stocks had a PE ratio between 0–50 and market cap-to-sales ratio below five—basic screens to assess a stock’s fundamental viability. “Most of the stocks from SME or microcap space have low corporate governance standards and no institutional ownership, thus investors would be better off staying away from them,” he said.Gupta echoed the caution “Yes, there can be exceptions, but are you expert enough to understand the exceptions? If not, stay away from such stocks.”(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
