Top 5 PSU Penny Stocks List in India

Almost every trader now considers penny stocks as one of the acceptable forms of investment. These stocks attract investors searching for stocks with high-growth potential at lower investment amounts. In India, the PSUs present a special category of penny stocks among all the available classes of shares. These stocks are linked to state-owned firms, though they are cheaper than blue chips and likely to grow further, making them ideal for long-term investment. PSU penny stocks can be a good investment when added to a portfolio, but like any other investment, they also have risks.

It is a blog post on PSU penny stocks, unveiling the best PSU penny stocks to watch in 2024 and an overview of PSU penny stocks, their advantages and disadvantages. We shall also look at how we can invest in them and when we do, what aspects we should keep in mind.

What is PSU Penny Stock?

PSU penny stocks are defined as those stocks which have public sector undertakings that are priced below ₹100 each. These stocks are of government-owned companies in various sectors, such as banking, manufacturing, and energy. Despite their low prices, these companies are most attractive to investors due to support from the Indian government.

PSU penny stocks are considered high-risk, high-reward investment opportunities. A surprising number of these stocks are still cheap, which can lead to significant gains for the trader or investor willing to buy and hold for the long term. However, these stocks belong to companies with low profitability or losses, so these stocks come under higher risks.

5 Best PSU Penny Stocks List 2024

Here are some of the best PSU penny stocks to watch in 2024:

1. MMTC (Metals and Minerals Trading Corporation of India)

• Founded: 1963
• Headquarters: New Delhi, India
• Business Segments: MMTC is a large trading company in India and a significant public sector entity belonging to the Ministry of Commerce and Industry. It imports and exports precious metals, coal, minerals, agro-products, fertilizers, etc.
• Stock Insight: With an emphasis on minerals and trading operations, MMTC has enormous potential for long-term investors in the penny stock segment.

Key Features

1. The company facilitates trading in commodities that are essential to the Indian economy.
2. It plays a crucial role in India’s gold and silver market.
3. Actively promotes India’s export-oriented growth.

2. Bank of Maharashtra

• Founded: 1935
• Headquarters: Pune, Maharashtra, India
• Business Segment: Bank of Maharashtra is one of the most significant public sector banks in India. It offers retail and corporate banking and various financial services comprising loans, savings accounts, insurance products, and many other services.
• Stock Insight: Its steady growth and consistent government backing make it a solid contender among PSU penny stocks.
  

Key Features

1. Has a network of more than 2400+ branches across India.
2. Focuses on rural and semi-urban banking.
3. Plays an important role in carrying out India’s financial inclusion programs.

3. Indian Overseas Bank (IOB)

• Founded: 1937
• Headquarters: Chennai, Tamil Nadu, India
• Business Segment: Indian Overseas Bank offers various banking products such as retail banking, wholesale banking, and international banking. It is highly recognized for good foreign exchange and overseas remittance services.
• Stock Insight: Although it is a penny stock, IOB gets consistent government support, which anchors it for growth.

Key Features

1. Has a network of more than 3000+ branches across India.
2. Market leader in adopting technology in public sector banks.
3. A global network of branches and alliances.
4. Export and import aid are given importance.

4. Central Bank of India

• Founded: 1911
• Headquarters: Mumbai, Maharashtra, India
• Business Segment: A premier Indian bank and one of the country’s oldest banks, the Central Bank of India offers many banking products and services. It has been focusing on the development of rural and priority sectors.
• Stock Insight: The Central Bank of India provides penny stock investors with a stable option, considering its historical background and market coverage.
  

Key Features

1. Has a network of more than 4600+ branches across India.
2. Leading name in the microfinance and SME markets of India.
3. The central welfare schemes of the governments, such as PM Jan Dhan Yojana, are its key partners.

5. UCO Bank

• Founded: 1943
• Headquarters: Kolkata, West Bengal, India
• Business Segment: UCO Bank is a major public sector bank that can be categorized as one of the numerous banking and financial service providers. The global outreach and partnerships in international trade and commerce sets it apart.
• Stock Insight: UCO Bank’s diversified services make penny stocks more dependable for investors tapping the banking sector.

Key Features

1. Has a network of more than 3000+ branches across India.
2. International operational existence with overseas offices in numerous nations.
3. Has a preference for corporate banking and forex business.
4. It is an active participant in government social programs.

Key Performance Indicators (KPIs)

While analyzing penny PSU stocks, it is always important to consider those key performance indicators (KPIs) that could give an idea about the potential of the stock. The most important aspects that one looks at include:

Advantages of PSU Penny Stocks Investments

A PSU penny stock investment can fetch several benefits from a state-owned enterprise. Some of them are as follows:

• Better Security and Government Support: Stocks from Government-owned companies are backed by security and state support.
• Lower cost of entry: PSU penny stocks are low-priced, allowing even beginner investors or those with diversified portfolios to invest in these stocks.
• High Prospects of Returns: These stocks can increase manifold times if the underlying company does well, thereby offering the potential for good returns.
• Diversification into the Banking, Energy, and Manufacturing Sectors: Investments in these stocks help you diversify into the banking, energy, and manufacturing sectors.
• Dividend Payout: Certain PSU penny stocks also offer dividend payouts, which act as a source of passive income for investors.

Disadvantages of Investing in PSU Penny Stocks

While there are advantages, there are also disadvantages of penny PSU stocks:

• Market Volatility: PSU penny stocks can be too volatile to make investments in the short run.
• Low Liquidity: The trading volumes of these shares are pretty low, which might create problems in buying and selling shares at good prices.
• Underperformance: PSU firms may be under so many operational burdens that they underperform on stock markets.
• Regulatory Risk: The government still favours PSU companies. Regulatory change or political shift can have an adverse impact on the stock price.

How to Invest in PSU Penny Stocks?

Investing in PSU penny stocks is the same as investing in any other stock. Here’s a step-by-step guide:

• Choose a Stock Broker in India: Select a reliable broker that gives access to online trading platforms. A good broker will offer the tools and resources necessary for research and analysis.
• Open a Trading Account: To start trading, an individual needs to open a trading account with the chosen broker. He also needs a Demat account to keep his shares in a dematerialized form.
• Research and Choose Stocks: Do thorough research on PSU penny stocks based on key performance indicators, growth potentials, and industry performance.
• Place Order: Once you have chosen a stock, place an order through the trading platform. You can place a market order, limit order, or limit order as per your requirement.
• Track Your Portfolio: After buying PSU penny stocks, one must be watchful of market trends and the performance of stocks to make holding or selling decisions.

Conclusion

Investing in PSU penny stocks allows one to capitalize on potential opportunities in undervalued companies that are supported by Governments. While having huge growth potential, there’s also the risk involved. So, considering such risks, the best PSU penny stocks can deliver a good return if you carefully consider the management of the company. Always take a position in these companies with a long-term view and always track your investments closely.

Frequently Asked Questions (FAQs)