3rd August 2011, 09:07 PM
Penny stock is also called 'chillar stock',i.e.the price is so low that you can buy it with a few pennies or below $1.
A penny is one cent,100 cents make a dollar,a similar equivalent would be 1 paisa.
The term penny stock refers to the pricing of the stock,but most penny stocks are also micro-caps.
According to the Securities and Exchange Commission,any stock that is below $5 can be considered a penny stock,that is why Citigroup did a reverse 10 to 1 split to get its shares to a more 'respectable' price level.
In the Indian context,
1.Any stock below Rs 10 is generally labeled as a penny stock.
2.Micro-caps are stocks with market cap of less than Rs 100 Crores.
These stocks are more vulnerable to price manipulation due to low liquidity(be careful of unscrupulous Blogs,Tweets,SMSes etc.),also
there is very little information on these companies available in the public domain.
I believe that micro-caps should not be ignored and would like to draw a qualitative difference between a penny stock and a micro-cap,quality micro-cap stocks can give you opportunities to generate great returns if you can find them.