The Best Penny Stock Trading Online Brokers in India

Published on Monday, March 30, 2015 by Chittorgarh.com Team | Modified on Sunday, August 9, 2020

What is a Penny Stock in India?

Penny stocks are the scripts which are listed in stock exchanges and have a very low value. Most times there are a very few buyers/sellers for such scripts in the stock exchanges. They are highly volatile, easy to manipulate and thus very risky to trade.

Penny Stocks in India are the stock which fall in one of the categories as below:

1. Script is priced less than Rs 10 per share.
2. Script is listed as illiquid securities by the exchange.
3. Script is part of Trade-to-Trade (T2T) segment of the exchange.
4. Script is part of Z group of securities.
5. Script on which Exchange VaR (value-at-risk) is more than 50%.
6. Script whose average daily volume is less than 15000 shares (collectively for all exchanges) in last 7 days.

Note:

• Most penny stocks are traded in 'Trade for Trade' segment (Trade-to-Trade or T2T), which means all trades results in to delivery. Investors are not allowed to do day trading in these stocks. This arrangement is made by the exchange to avoid speculations.
• There is always a valid reason why the stocks are trading at such a low price or with low volume.
• Penny stock's prices are easy to manipulate and thus highly volatile. Tips providers, punters, market speculators etc. publish positive reports about the companies to manipulate the prices frequently.

Why should or should not trade in penny stocks?

• The profits could be multi-fold. The losses could also be in multiples in a very short time. i.e. a stock of Rs 1 can spike to Rs 2 which could results in to 100% profit in just couple of days.
• Penny stock trading has much higher risk reward ratio. Investor must be very careful while betting on penny shares.
• Penny stocks are not good for long term investing as usually there are major problems in the company and that the reason the price of the share is so low. In most cases these companies get delisted from stock exchanges in few years.
• The trading volume in penny stocks fluctuate frequently. In just couple of days, the trading volume goes down from lakhs to zero. The investors can easily get trapped in this.

Which brokers should you choose for Penny Stock Trading?

Finding right broker for penny stock trading is very difficult as most brokers charges a very high brokerage for trading in penny shares at NSE and BSE. Also many broker do not offer trading in penny stocks because of higher risk associated with them.

Some discount brokers offer cheapest and the best penny stock trading sites. Here are some of the brokers and their offering in terms of penny stock trading:

1. Zerodha (Penny Stock Trading with Zerodha)

   • Trading is available in all stocks which is on the exchange in any category. There is no additional charges for trading in penny stocks.
   • Trading is available in penny stocks which are even less than Rs 2.
   • Trading is available in stocks comes in T2T or Z, BE or BZ category.
   • Flat Brokerage - Rs 20 or 0.1% whichever is lower for equity delivery trading. No special penny stock brokerage or minimum contract charges.
   • Buy Today Sell Tomorrow (BTST) facility is not available in the Trade to Trade group and the penny category stocks.
   • Basket orders is also not allowed on penny stocks.
   • Know more about Zerodha...

2. Upstox (Penny Stock Trading with Upstox)

   • Upstox, the popular discount broker doesn't offer trading in penny shares in India. But trading in penny shares is allowed on selective basis on customer request if certain norms are met. These norms includes upfront 100% margin to buy penny stocks.
   • Know more about Upstox...

3. Trade Smart Online (Penny Stock Trading with TSO)

   • TSO offers penny stock trading with restriction.
   • Customer can trade in Z group of securities and scripts in T2T segment or penny stocks with the exposure which is considerably low. In some cases the margin is 100%.
   • Flat brokerage of Rs 15 per trade is charged.
   • Know more about Trade Smart Online...

4. ICICI Direct (Penny Stock Trading with ICICDirect)

   • ICICI Direct offers trading in most of the stocks listed on the stock exchanges.
   • ICICI Direct charge brokerage of flat Rs 0.05 per share for shares price less than Rs 10. This makes it very expensive to trade in penny stocks with ICICI Securities. i.e. when you buy 5000 shares of a company at Rs 2 per share, you pay brokerage of Rs 250 (5000 * 0.05), which is 2.5% on buy side and 2.5% on sell side.
   • ICICI Securities have internal risk management team which allows / disallows penny stocks to be available for trading. If stocks are not available for trade, the customer gets error saying 'buying in this scrip is not allowed for the moment'.
   • Know more about ICICI Direct...

5. Sharekhan (Penny Stock Trading with Sharekhan)

   • Like most traditional broker Sharekhan offers trading in most equity shares listed at BSE and NSE but reserve the rights to restrict certain penny stocks for trading based on internal risk assessment.
   • Sharekhan charges minimum brokerage of 10 paise per share when share price is Rs 20 or less in delivery based trading. This make it very expensive to trade in penny shares with Sharekhan.
   • Know more about Sharekhan...

Based on these examples, Discount brokers like Zerodha makes a lot sense for trader looking for cheaper option to trade in Penny Stocks in India.