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How to Buy Over-The-Counter Stocks in the Share Market
04 Aug 2025
2 mins read
In an over-the-counter (OTC) market, shares and securities are traded directly between parties, outside of traditional stock exchanges like NSE or BSE. These decentralized markets rely on brokers and dealers to facilitate the buying and selling of a wide range of financial instruments, including bonds, currencies, equities, commodities, and structured products.
OTC markets can offer greater liquidity, lower transaction costs, and increased access for different types of investors. In this blog, we will explore everything you need to know about over-the-counter stocks, including how to buy over the counter stocks, the best over the counter stocks, their advantages, potential risks, and tips for informed investing.
You may also want to read about Best Stocks for Swing Trading in India 2025
What are Over-The-Counter Stocks?
Over-the-counter (OTC) stocks refer to shares of companies that are not listed on official stock exchanges like the NSE or BSE, often because they don’t meet the strict listing requirements. For instance, on the Bombay Stock Exchange (BSE), only small-cap companies with a minimum market capitalisation of ₹5 crores and a minimum post-issue paid-up capital of ₹3 crores can get listed. Companies that don’t meet these standards can still issue shares, but their stocks won’t be eligible for trading on major exchanges.
These shares, often known as OTC or penny stocks, are typically traded through full-service brokers. If you're wondering how to buy over the counter stocks, it usually involves working with a broker who has access to the OTC market. In this blog, we’ll also cover how to identify the best over the counter stocks and evaluate their potential risks and rewards.
Table of Contents
What is the Difference Between OTC and a Stock Exchange?
These are the differences between OTC and Stock Exchange:
Features | OTC | Stock Exchange |
| Meaning | OTC is a market where securities are traded directly between buyers and sellers without using a stock exchange. | The Stock Exchange is a centralised marketplace where sellers and buyers can trade securities, like stocks and derivatives, following the pre-established guidelines. |
| Control | In the OTC market, there are lower reporting requirements and regulations. | In the stock exchange, there are strong reporting requirements and regulations. |
| Transparency | There needs to be higher transparency and more public information available. | There is high transparency and high public disclosures. |
| Liquidity | Low liquidity | High liquidity due to large trade volumes. |
| Cost | The listing fees are low but the trading cost is high. | The listing fees are high but the trending cost is a little lower. |
| Speed of Execution | The speed here is fast because the transactions can be completed directly between parties. | The speed here could be slower due to the need for price matching and the potential for network delays. |
| Examples of Stocks | Small-cap stocks, foreign stocks, bonds, and derivatives | Large-cap stocks, ETFs, and mutual funds |
| Risk | High risk is involved because of less information and regulation. | The risk is lower here because of strict regulatory supervision. |
Advantages and Disadvantages of OTC Stocks
Here are the advantages and disadvantages associated with OTC Stocks:
Advantages | Disadvantages |
| Good opportunity to invest in small start-up companies. | There is an increased risk associated with funding unknown companies. |
| By investing in OTC stocks you get the chance to diversify your portfolio. | It can include risks and more speculative investments. |
| As it is less stringent, small companies can easily enter the market. | Less stringentness can also lead to more fraud and misinformation. |
| The liquidity is sometimes high for certain niche markets. | There needs to be more transparency and public information available about these stocks. |
| The listing fees for companies are lower leading to a wider variety of stocks. | Low listing costs can attract less reliable companies. |
How to Buy Over-The-Counter Stocks in India?
Since OTC stocks are not traded on major stock exchanges, they cannot be purchased through a standard online Demat account like regular listed stocks. Instead, buying these stocks requires the help of specific types of brokers who specialize in over-the-counter trading.
Understanding how to buy over the counter stocks involves knowing the roles of these brokers and how they operate in OTC markets. In the sections below, we’ll explain the different types of brokers and their functions, and guide you in identifying the best over the counter stocks to consider for investment.
Full-Service Brokers
Full-service brokers offer a wide range of services including buying and selling stocks, they provide portfolio management and trading advice. As they have physical offices in multiple areas they offer thorough services and access to OTC stocks.
Discount Brokers
To facilitate trading, discount brokers usually use Demat accounts and internet platforms. As compared to full-service brokers, discount brokers often charge low fees and offer limited services. Mostly all the online brokers belong to this category.
To purchase the OTC stocks you will need to employ a full-service broker because they have a physical presence and provide a wider range of services.
Conclusion
To sum up, investing in over the counter stocks can be a great opportunity for investors wishing to diversify their portfolios and to gain exposure to emerging new companies. As these equities are traded off traditional stock exchanges they offer high returns but also carry high risks because of low liquidity, fewer regulations, and high volatility.
Investors can make informed decisions by gaining knowledge about how this market works, what makes it different from traditional markets, and how to buy over the counter stocks. Additionally, by downloading a reliable share market app you can stay updated on your investments and make informed decisions on the go.
