New Delhi, Nov. 10 -- Recently, Securities and Exchange Board of India (Sebi) chairperson Tuhin Kanta Pandey said the regulator is working on delisting companies with no economic activity, particularly penny stocks.

"These companies pose a potential danger to investors, and therefore, it is necessary to remove them from the listed space. We are making efforts towards their delisting," the Sebi chairman said.

Penny stocks are popular among retail investors. The lure of making large gains quickly with a small investment draws many to these shares. But their low prices can mask weak business fundamentals, poor liquidity and the risk of market manipulation. Here is a look at the risks they pose.

Penny stocks are typically priced in single ...