Stocks Under Rs 500

Stocks under Rs. 500 could be a lucrative long-term investment opportunity for both beginner and experienced investors. These stocks offer an accessible entry point into the vast world of the stock market and have significant potential for delivering market-beating returns.

Stocks under Rs. 500 refer to shares of companies listed on stock exchanges whose market price is below 500 Indian Rupees per share. These stocks are often of companies featuring in the mid-cap market capitalisation segment of the Indian stock market. However, it may also include companies from the small-cap and micro-cap segments.

Companies featured in the list of the best stocks to buy under 500 Indian Rupees usually are in the growth phase of the business cycle and have strong future potential. However, despite the high potential for growth, these stocks are considered riskier compared to those that are more well-established

As an investor, it is important to remember that share price alone does not determine a stock's value or potential. Factors such as company fundamentals, growth prospects, and overall market conditions play crucial roles in determining a stock's worth and future performance.

Stocks under 500 Indian Rupees have several distinct characteristics that set them apart from the other categories of companies. Let us look at some of the key features of these stocks.

Growth Potential

Since shares under 500 Indian Rupees represent growing companies from emerging sectors, they often have significant growth prospects.

Higher Volatility

Stocks under Rs. 500 often witness high short-term trading volumes, which makes them more volatile compared to stocks of well-established companies.

Increased Sensitivity to Market Sentiment

Another key characteristic of some of the best stocks under 500 Indian Rupees is that they are highly sensitive to shifts in market trends and sentiment.

Potential for bonus issues and stock splits

Although most stocks under 500 Indian Rupees are not known for issuing dividends to their shareholders, they may issue bonus shares or go through stock splits. These corporate actions have the potential to benefit shareholders.

Investing in the best shares under 500 Indian Rupees is a relatively straightforward process. All you need to do is follow the steps outlined below.

Step 1: Start by opening a trading and demat account with a stockbroker. These accounts are required to invest in the stock market.

Step 2: Utilise stock screening tools, such as the one available on Motilal Oswal’s Research 360 to filter stocks based on price and other criteria.

Step 3: Once you have shortlisted stocks, conduct thorough research on the companies you are interested in. When analysing companies, make sure to focus on their financial statements, growth prospects, management quality, and industry position.

Step 4: Upon finalising the stock, place a buy order for the number of shares you wish to purchase through your stockbroker’s trading portal.

Step 5: Your order will be executed if it matches with a corresponding sell order. Once the order is executed, you will be notified by the trading platform.

Step 6: The number of shares you purchased will be credited to your demat account by T+1 trading day.

Investing in the best shares under 500 Indian Rupees comes with a plethora of different benefits. Here is a quick overview of some of the key advantages that you get to enjoy.

Lower Capital Requirement

Since the market price of these stocks is less than Rs. 500, they are much more accessible and allow traders and investors with smaller investment capital to participate in the wealth-creation potential of the stock market.

Portfolio Diversification

Thanks to the lower capital requirement, investors can spread risk more effectively by investing in shares of multiple companies across various sectors and industries.

Potential for High Returns

The return generation potential of some of the best stocks under 500 Indian Rupees, far exceeds that of even well-established companies, especially in the long run.

Easier to Average Down

With stocks under 500 Indian Rupees, purchasing additional shares to lower the average purchase price during unfavourable market movements is easier and more feasible.

While there are several advantages, investing in shares under 500 Indian Rupees also comes with significant risks. Here is a quick overview of some of the key challenges associated with these stocks.

Potential for Substantial Losses

As you have already seen, stocks under 500 Indian Rupees often experience significantly higher volatility. Unexpected sharp fluctuations in the price due to adverse market movements could potentially lead to substantial losses.

Liquidity Constraints

Some stocks under 500 Indian Rupees may have lower trading volumes. This often makes it challenging to buy or sell shares at the intended prices.

Susceptibility to Business Risks

Even the best shares under 500 Indian Rupees may face challenges and risks that could threaten the company’s business and financial health, especially if the companies are operating in highly competitive sectors.

Dilution Risk

Companies in this price range may raise additional capital by issuing new shares to the public. This could dilute the existing shareholders' stake and ownership rights.