Small-caps surge despite BSE action

Mumbai, Aug 16 | Updated: Aug 17 2005, 05:30am hrs
Regulatory authorities are exasperated over the bull run in the stock market. Even after resorting to some of the strictest surveillance measures, the rally in volatile stocks has failed to come under control.

In the case of small-cap stocks, despite several regulatory actions including the application of a trade-to-trade (TTT) regime, the bull run has not come to a halt. However, the authorities have succeeded in reining in trading volumes.

BSE has shifted more than 300 stocks since July 15 to the TTT category to combat the unusual price surge. But only in 47 counters have prices come down that too marginally. The maximum drop has been of 16% in Oxford Industries to Rs 16.40.

On the other hand, trading volumes have slipped considerably in many counters. During the period, the BSE small-cap index rose 14.53% (700.87 points) from 4,823.25 to 5,524.12 on August 16.

STUBBORN RISE

EMore than 300 stocks shifted to trade-to-trade category since July 15
But prices have come down only in 47 counters
Trading volumes have slipped considerably in many counters
Experts say current run is driven by liquidity

Sandeep Shenoy, head of research, Pioneer Intermediaries said, The constant rise in prices of these stocks itself underlines the fact that the current rally is driven by liquidity. It also points to the fact that there is no dearth of liquidity even for stocks placed under the TTT category because these stocks attract higher VaR (value at risk) margins, which are as high as 50%, in some cases.

Under TTT, it is mandatory that each trade whether buy or sell results in delivery, and no netting of trades is allowed.