Best Stocks For Beginners With Little Money in 2024

Investing in stocks can be an excellent way to grow your wealth, even if you have limited capital. If you're a beginner looking to get started, finding the best stocks for beginners with little money in India can seem overwhelming. To guide you, our expert research analyst - Sumeet Bagadia at Choice India has carefully curated a list of companies that are affordable, reliable, and have potential for growth in 2024.

This article will cover the best companies for beginners to invest in India and highlight key insights on how to make smart investment choices.

List of Best Shares for Beginners With Little Money

Let’s take a look at the 10 best shares to buy for beginners:

Research Analyst Name: Sumeet Bagadia
Designation: Executive Director and Head of Technical Research at Choice
Experience: 15+ years of experience in the Indian Capital Market

Disclaimer: Please note that the data presented here are subject to change, and past performance is not indicative of future results. It is advisable to undertake meticulous research or consult with a financial expert before investing.

Factors To Be Considered While Choosing Stocks for Beginners

When selecting the best stocks for beginners with little money in India, several factors are to be considered to ensure affordability for newcomers:

• Company Stability and Market Presence: Look for companies with a stable foundation and a consistent track record.
• Growth Potential: Consider companies in industries with high growth potential, such as technology, renewable energy, or consumer goods.
• Financial Health: Evaluate a company’s revenue growth, net profit, and return on equity (ROE).
• Valuation and PE Ratio: A company’s Price-to-Earnings (PE) ratio can provide insight into its valuation.
• Dividend Yield: Companies that pay dividends can provide a steady income stream, adding an element of stability to your portfolio.
• Market Capitalisation and Risk Level: Beginners often prefer mid to large-cap stocks for their stability. While smaller caps offer higher growth potential, they're riskier.
• Recent Performance and Recovery Potential: Consider stocks that show signs of recovery or consistent improvement, especially in markets that have recently experienced downturns.
• Innovation and Future Opportunities: Companies focusing on innovation and expansion into high-growth areas can offer long-term rewards.

Overview of Best Companies to Invest in India for Beginners

Here’s a detailed overview supported by relevant data of why these companies are some of the best stocks for beginners with little money in India in 2024.

Mishtann Foods Ltd

Mishtann Foods is a leading player in the Indian rice and food processing sector. With a strong presence in the FMCG industry, the company is capitalising on the growing demand for processed foods in India.

• Price: ₹14.7
• Market Capitalisation: ₹1,580 Cr.
• PE ratio: 4.24
• Dividend Yield: 0.0068%
• Returns Over 3 Years: 12.3%
• Return on Equity (ROE): 98.7%
• Net Profit: ₹365 Cr.
• Focus: The company intends to expand its business footprint by acquiring companies in both domestic and international markets.

Yes Bank Ltd

Yes Bank is a prominent private sector bank in India, offering a wide range of banking and financial services to individuals and businesses. Known for its innovative approach, Yes Bank has been focusing on digital banking solutions to enhance customer experience.

• Price: ₹ 20.0
• Market Capitalisation: ₹62,854 Cr.
• PE ratio: 34.16
• Dividend Yield: -
• Returns Over 3 Years: 14.8%
• Return on Equity (ROE): 3.18%
• Net Profit: ₹ 1,792 Cr.
• Focus: By leveraging technology, focusing on customer experience, and strengthening its financial position, the bank aims to regain its market share and position itself as a leading player in the Indian banking industry.

Indian Overseas Bank:

Indian Overseas Bank (IOB), a long-standing public sector bank in India, provides a variety of banking services. It has shown steady recovery post-restructuring, making it a viable option for long-term investors.

• Price: ₹52.9
• Market Capitalisation: ₹99,956 Cr.
• PE ratio: 33.69
• Dividend Yield: -
• Returns Over 3 Years: 35.2%
• Return on Equity (ROE): 9.98%
• Net Profit: ₹2,941 Cr.
• Focus: The bank expects a credit expansion of 13% to 14% and a deposit expansion of 11% to 12% in the fiscal year 2025.

Central Bank of India Ltd:

Another government-owned bank, the Central Bank of India has a strong market presence. With initiatives to improve financial health, it is on a recovery path and offers growth potential.

• Price: ₹56.1
• Market Capitalisation: ₹48,735 Cr.
• PE ratio: 14.26
• Dividend Yield: -
• Returns Over 3 Years: 36.6%
• Return on Equity (ROE): 8.71%
• Net Profit: ₹3,426 Cr.
• Focus: The bank prioritises managing distressed assets and enhancing performance across all segments. It aims to grow retail, agriculture, and MSME lending through co-lending, pool buyouts, and TReDS platform-based trade receivables discounting.

Suzlon Energy Ltd

Suzlon is a leading provider of wind energy solutions in India. As the country focuses on expanding its renewable energy capacity, Suzlon stands to benefit from government initiatives and growing demand for clean energy.

• Price: ₹60.7
• Market Capitalisation: ₹82,191 Cr.
• PE ratio: 86.62
• Dividend Yield: -
• Returns Over 3 Years: 112%
• Return on Equity (ROE): 28.8%
• Net Profit: ₹960 Cr.
• Focus: Suzlon Energy, a leading player in the renewable energy sector, is focused on expanding its global footprint and driving innovation in wind energy solutions.

IDFC First Bank Ltd

IDFC First Bank, a relatively new player in the Indian banking landscape, focuses on providing retail banking, corporate banking, and asset management services. With a strong emphasis on digitalisation and a customer-first approach, IDFC First Bank is expanding its footprint in urban and rural markets.

• Price: ₹66.9
• Market Capitalisation: ₹48,950 Cr.
• PE ratio: 20.63
• Dividend Yield: -
• Returns Over 3 Years: 8.82%
• Return on Equity (ROE): 10.1%
• Net Profit: ₹2,319 Cr.
• Focus: IDFC First Bank is focused on leveraging technology to enhance customer experience and drive growth. The bank is investing in digital innovation, expanding its retail banking operations, and strengthening its focus on emerging segments like MSME and agriculture.

NHPC Ltd

NHPC Ltd is India’s largest hydroelectric power producer and a key player in the country's power generation. The company has a strong balance sheet and consistent performance.

• Price: ₹81.0
• Market Capitalisation: ₹81,395Cr.
• PE ratio: 27.46
• Dividend Yield: 2.34%
• Returns Over 3 Years: 35.9%
• Return on Equity (ROE): 9.61%
• Net Profit: ₹3,417 Cr.
• Focus: The hydropower company is diversifying into renewable energy, particularly solar power. It has 1,135 MW of solar capacity under construction and has recently secured a contract for an additional 2,000 MW in Rajasthan. Additionally, it has a pipeline of 9,090 MW of solar projects, including those as an intermediary procurer.

NHPC Ltd. is also included in our top solar energy stock picks.

IDBI Bank Ltd

IDBI Bank is a government-backed financial institution with a long history in the Indian banking sector. It has been making significant strides in restructuring and growth, making it a promising investment.

• Price: ₹81.8
• Market Capitalisation: ₹87,912 Cr.
• PE ratio: 12.97
• Dividend Yield: 1.84%
• Returns Over 3 Years: 15.6%
• Return on Equity (ROE): 11.8%
• Net Profit: ₹6,795 Cr.
• Focus: The Bank aims to achieve 10-12% growth, maintain a 40:60 corporate-to-retail ratio, maximise fee income, and keep NIM above 3.25%. It plans to partner with fintechs to boost the origination of personal and education loans.

Canara Bank Ltd

As one of India's premier public sector banks, Canara Bank offers a wide range of banking services and has shown consistent growth over the years.

• Price: ₹103
• Market Capitalisation: ₹93,836 Cr.
• PE ratio: 5.85
• Dividend Yield: 3.12%
• Returns Over 3 Years: 31.0%
• Return on Equity (ROE): 17.9%
• Net Profit: ₹16,142 Cr.
• Focus: The bank is expanding its branch network to address deposit mobilisation challenges. The company established 150 new branches in the previous fiscal year and projected the establishment of an additional 250 branches in the upcoming fiscal year.

Bank of India Ltd

Another prominent public sector bank, Bank of India (BOI) has a vast network and offers a range of banking services. It has made significant improvements to its financial health and is positioned for long-term growth.

• Price: ₹112
• Market Capitalisation: ₹50,853 Cr.
• PE ratio: 7.05
• Dividend Yield: 2.50%
• Returns Over 3 Years: 22.0%
• Return on Equity (ROE): 9.98%
• Net Profit: ₹7,817 Cr.
• Focus: The bank forecasts a 13% credit growth and 12% deposit growth in FY25, prioritising CASA and retail term deposits. It aims to boost high-yielding RAM and mid-corporate advances, secure low-cost deposits, and maintain a 3% NIM and 0.90% ROA for FY25.

Each of these companies presents unique opportunities for beginners to invest in India.  By choosing stocks that align with your investment goals and risk tolerance, you can build a diversified portfolio that has the potential for both steady returns and growth in India’s dynamic market.

Types of Stocks Beginners Should Consider Investing In

Different types of stocks beginners should consider investing in for high growth potential:

• Blue Chip Stocks: These are shares of well-established, financially stable companies with a history of reliable performance. Blue-chip stocks are often characterised by their relative safety and steady dividend yields.

[Canara Bank is a blue-chip stock in their respective sectors (banking and defence).]

• Growth Stocks: Growth stocks are shares of companies with high growth potential, often in emerging or expanding sectors. They may offer higher returns but carry moderate risk.

[Suzlon Energy Ltd. can be considered as a growth stock in the renewable energy sector.]

• Dividend Stocks: Dividend stocks are from companies that regularly distribute a portion of their earnings to shareholders, providing passive income along with potential stock price appreciation.

[NHPC Ltd (hydropower) and Central Bank of India Ltd are known for paying dividends, which can benefit beginners seeking steady income.]

• Index Funds & ETFs: Index funds or Exchange-Traded Funds (ETFs) are diversified portfolios tracking a specific index, allowing beginners to invest in multiple companies with low risk and lower fees.

[Though not an individual stock, an ETF that includes companies like Indian Overseas Bank and Bank of India Ltd offers beginners exposure to the banking sector as a whole with built-in diversification.]

Advantages of Investing in Low-Price Shares

Here are the key benefits of choosing low-priced shares for beginners:

Affordability and Accessibility

Low-priced shares allow beginners to enter the stock market without a large initial investment. Stocks priced around ₹10-15 make it easy for new investors to buy multiple shares and gain experience without significant capital.

Diversification with Limited Funds

Because of their low price, investors can purchase shares across multiple companies, enabling them to diversify within a small budget. For instance, a beginner could invest in a mix of sectors by buying low-priced shares, spreading risk across different industries.

Learning Opportunities

Low-cost shares offer beginners an affordable way to learn the basics of trading and gain confidence. By investing in low-priced stocks, beginners can observe market trends, build familiarity with portfolio management, and refine their strategies over time.

Potential for Higher Returns

While riskier, low-priced shares can yield high returns, especially if the company experiences a positive growth trend. A small price increase in a low-priced stock can lead to a significant percentage gain, which is attractive to investors looking for aggressive growth opportunities.

Accessible Entry into Emerging Sectors

Low-priced stocks often represent smaller companies in emerging sectors that are otherwise costly for large-cap stocks. Investing in these stocks allows beginners to access growth industries with strong future demand and favourable government policies.

How to Find the Best Stocks to Buy for Beginners in India?

Here are some essential steps to finding the best stocks for beginners in India:

• Understand Your Investment Goals and Risk Tolerance: Before diving in, clarify your financial goals (e.g., capital growth, income) and risk tolerance. Beginners should look for low-volatility stocks with stable growth potential and a history of dividends if they prefer lower risk.
• Research the Company Fundamentals: Look at key metrics like revenue, profit growth, and debt levels. The Price-to-Earnings (P/E) ratio serves as a useful tool for evaluating whether a stock’s price aligns fairly with its earnings. Generally, a lower P/E ratio suggests a more affordable entry point.
• Focus on Established and Growing Industries: Select stocks in industries with a stable or high growth rate. For example, renewable energy, banking, and EV sectors are experiencing growth in India.
• Consider Government-Backed Companies: Government-backed or public-sector enterprises often have added stability and support. NHPC Ltd (hydropower) and Central Bank of India Ltd are examples of companies benefiting from government backing, making them relatively safer investments.
• Look for Low-Priced Stocks with Growth Potential: Low-priced shares (penny stocks) can be ideal for beginners with limited capital. Examples include Mishtann Foods Ltd and Bank of India Ltd, which offer affordable entry points with potential upside.
• Evaluate Dividend History for Passive Income: Dividends provide passive income and indicate financial stability. Companies like NHPC Ltd have a strong dividend-paying record, adding value for beginners seeking consistent returns.

How to Invest in Stocks With Little Money?

Investing in stocks with little money is entirely feasible, especially with today's technology and fractional share options. Here’s a step-by-step guide to get started:

Set Financial Goals and Budget

Determine what you aim to achieve with your investments, whether it's long-term growth, saving for a specific goal, or simply building wealth. Start with a comfortable amount, anything from ₹100 to ₹500 can work if invested strategically.

Open a Demat Account

To buy stocks in India, you’ll need a Demat account, where your investments are held in electronic form. To experience a seamless trading experience, open a Demat account with Choice.

Fund Your Account:

Once your account is set up, transfer the budgeted amount from your bank account to your Demat account.

Research and Select Stocks:

Look into stocks that match your investment goals and risk tolerance. For beginners, consider stocks of companies with a strong track record.

Start Small and Place Your Order:

Place an order through our brokerage platform - Choice FinX. Choose from options like market orders (buy at the current price) or limit orders (set a preferred price).

Track and Adjust Your Investments:

Once you've made a purchase, regularly review your portfolio. Long-term success in investing often comes from staying informed, setting realistic expectations, and adjusting your investments as needed.

With these steps, you can begin building wealth even with limited funds, while gradually learning and growing your investment skills.

Things to Keep in Mind While Investing in Stocks With Little Money

Investing in stocks with minimal funds is achievable with the right approach and consistent efforts. Following are certain things you should consider when investing in equities with little money:

• Evaluate Your Financial Health

Begin by assessing your current finances, including income, expenses, and any debts. Knowing where you stand financially will help you set realistic investment goals without compromising essential needs.

• Learn Stock Market Essentials

Learning the fundamentals of the stock market is essential for beginners. Learn about stock types, how trading works, and the risks involved. Familiarising yourself with concepts like market cap and P/E ratios will help you make more informed decisions.

• Prioritise Consistent Savings

Regular saving is essential for building your investment funds. Set aside a small, manageable amount each month specifically for investing, even if it’s just a few hundred rupees. Over time, this habit can grow your investment pool significantly.

• Start Small and Build Gradually

Starting with a modest investment is a smart approach for beginners. Focus on stocks with stable growth potential, and gradually increase your investments as you gain experience and confidence in the market.

• Be Cautious with Low-Priced Stocks

While penny stocks may seem appealing due to their low cost, they can be volatile and risky. Research each company carefully and avoid putting all your funds into low-priced shares without understanding the potential risks.

• Invest with a Strategic Approach

Avoid impulsive decisions; take the time to research companies, understand industry trends, and set investment goals. Developing a strategy, such as focusing on growth stocks or dividend-paying shares, can help you stay focused and grow your portfolio steadily.

• Diversify Your Investments

Spread your funds across various sectors to reduce risk. By diversifying, you protect your investments from sector-specific downturns and increase the potential for stable returns.

• Keep Emotions Out of Your Decisions

Avoid making investment choices based on fear or excitement. Stick to your strategy, monitor your portfolio objectively, and make adjustments as needed, rather than reacting to short-term market fluctuations.

Risks Involved While Investing in Stocks With Little Money

Investing with limited capital can be rewarding, but it also carries specific risks that beginners should be aware of:

• Lack of Research and Resources:

Beginners with limited funds might not have access to premium research tools, leading to uninformed decisions.

Mitigation: Use free resources, stock analysis tools, and news sites to stay informed. Even limited research can improve your decision-making.

• Market Volatility:

Stock prices can fluctuate significantly due to economic conditions, market trends, or political events. With limited funds, such swings can impact your small investments substantially.

Mitigation: Focus on stable, well-established stocks with lower volatility and consider sectors known for stability, like utilities or banking.

• Limited Diversification:

With limited capital, it’s harder to spread investments across multiple stocks or sectors, increasing exposure to individual stock risks.

Mitigation: Start with diversified index funds or ETFs, which offer exposure to multiple companies, allowing for natural diversification even with a small investment.

• Overexposure to Low-Priced (Penny) Stocks:

Low-priced stocks may seem appealing due to their affordability, but they’re often highly volatile and may lack financial stability.

Mitigation: Research low-priced stocks carefully and limit exposure. Focus on stocks with solid fundamentals, or allocate only a small percentage of your portfolio to them.

• Emotional Decision-Making:

Beginners often react emotionally to market changes, especially when funds are limited, leading to impulsive buying or selling.

Mitigation: Stick to a long-term investment strategy and avoid panic-selling in downturns. Setting clear financial goals and adhering to them can help control emotional reactions.

End Note

Investing in stocks with limited funds may seem challenging, but it’s an accessible and rewarding way to grow your wealth when approached thoughtfully. By selecting beginner-friendly stocks, understanding market basics, and mitigating risks, you can build a solid foundation for financial growth over time.

Remember, the key to successful investing is patience, consistency, and informed decision-making. Start small, learn as you go, and embrace the journey as every step brings you closer to achieving your financial goals in India’s dynamic stock market.

FAQs Regarding Stocks for Beginners

What is the best stock for beginners with little money in India?

Stocks like Indian Overseas Bank, Mishtann Foods Ltd, and Central Bank of India are affordable and offer growth potential, making them suitable for beginners with limited funds.

Can I start investing with only 500 INR?

Yes, many stocks, especially penny stocks, allow beginners to start with 500 INR or less. It's best to use fractional investing or SIPs if investing in mutual funds or ETFs.

How risky is investing in low-priced stocks?

While low-priced stocks have higher volatility, risks can be managed by diversifying, investing gradually, and focusing on companies with strong fundamentals.

Should beginners invest in index funds?

Yes, index funds or ETFs are ideal for beginners due to their diversified nature, making them less risky and more stable than individual stocks.

How do I choose the right stocks as a beginner?

Look for sectors with growth potential (e.g. renewable energy, banking), and select companies with low debt, consistent earnings, and government support when possible.