Birla Tyres, Alok Ind: 41 penny stocks zoom over 100% from March lows

Among the noticeable names, Alok Industries, Birla Tyres, Opto Circuits, Andhra Cements, and Morepen Laboratories are some of the 41 counters that have rallied over 100% in the past two months

A recovery in the markets, especially in the small-cap segment, from their respective March low has seen over three-dozen penny stocks – typically described as those that trade below Rs 10 – skyrocket. Considered highly volatile and risky, some stocks have given a stellar 438 per cent return in the last two months.

Among the noticeable names, Alok Industries, Birla Tyres, Opto Circuits, Andhra Cements, Prozone Intu Properties and Morepen Laboratories are some of the 41 counters that have rallied over 100 per cent in the past two months. The S&P BSE Smallcap index that hit 10,590 levels on Tuesday has recovered 23 per cent from its 52-week low of 8,622 touched on March 24, 2020. In comparison, the benchmark the S&P BSE Sensex and the S&P BSE Midcap index have gained 19.8 per cent from their respective 52-week low levels hit on the same day.

Given the run-up seen since March, analysts have now become cautious on the small-cap segment and suggest investors use the rally to book profit. Instead, they suggest taking exposure to companies that have a strong balance-sheet and are not sitting on a large debt pile.

“Covid-19 pandemic will leave a number of companies badly hit in terms of their financial performance. Some of them may even have be forced to close down. As things stand, investors should avoid taking exposure in banking stocks, non-bank finance companies (NBFCs) and stocks of microfinance companies.

The rally in small-caps, especially these penny stocks should be used to exit and cleanse the portfolio,” advises A K Prabhakar, head of research at IDBI Capital.

While the parent company – Reliance Industries Limited (RIL) – has been in the thick of action since the past few weeks by selling stake in Jio Platforms to marquee investors, one of the companies where it has 37.7 per cent stake in has also seen its stock give stellar return since March. Shares of Alok Industries have zoomed 218 per cent to Rs 16.05 from level of Rs 5.05 on the BSE, with the stock hitting the upper circuit of 5 per cent for past 18 straight trading days.

Birla Tyres, a B K Birla group company engaged in auto tyres & rubber products business, closed at a 52-week high of Rs 15.07 on Tuesday. The stock has surged 438 per cent from Rs 2.78 on March 24 and has hit the upper circuit limit of 5 per cent in past 37 consecutive trading sessions. Likewise, the stock of real estate Company Prozone Intu Properties, too, has been hitting the upper circuit of 5 per cent for 11 straight days and has rallied 116 per cent from Rs 8.60 on the BSE. Radhakishan Damani (1.26 per cent) and Rakesh Jhunjhunwala (2.06 per cent) held over one percentage point stake in the company in quarter ended March 2020, data show.

While the rally has made analysts cautious on the small-caps, they expect the mid-cap and the large-cap segments to do well over the next few years despite the near-term pain.

“Generally, midcaps do badly in a falling market. However, they have performed in line with large-caps this year given their underperformance since the past two years. While in near-term, they would see more stress, mid-caps would outperform large caps over next two years,” says Jyotivardhan Jaipuria, founder and managing director at Valentis Advisors.

*List of stocks with over Rs 100 crore market-cap