BSE introduces new surveillance measure to curb volatility in mid, small cap stocks

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Updated: August 11, 2021 5:33 PM

BSE said that a security placed under add-on price band framework will remain in the framework for a minimum period of 30 calendar days and will be eligible to move out if it does not qualify the provisions of the framework thereafter.

new surveillance measure, small cap counters, BSE, Bombay stock Exchange, shortlisted securities, corporate actions of a material natureThe exchange said that review of the shortlisted securities under the framework -- inclusion or exclusion -- will be carried out on monthly basis.

To curb excessive volatility in mid and small cap counters, the BSE has introduced a new surveillance measure for certain stocks having a market capitalisation of less than Rs 1,000 crore.

The new measure, add-on price band framework, will be applicable to companies with a market-capitalisation of less than Rs 1,000 crore and on securities in groups — X, XT, Z, ZP, ZY, and Y, BSE said in a circular on Wednesday.

Under the framework, BSE said “the shortlisted securities, will have 6 monthly, 1 yearly, 2 yearly and 3 yearly price band in place of weekly, monthly, quarterly price band”.

These add-on price bands will be in addition to the applicable daily price bands of such securities.

The exchange, in a circular on Monday, had said the shortlisted securities will be subjected to additional periodic price limits of weekly, monthly and quarterly.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that BSE’s new surveillance framework with add-on price bands for specified stocks listed exclusively on the the exchange is a timely initiative to curb excessive speculative activity in these stocks.

“It is a fact that there is froth in the mid and small-cap space. Many stocks in this segment have low liquidity and, therefore, are capable of being manipulated by a group of traders,” he added.

According to him, in the present exuberant state of the market, manipulation is easy and appears to be happening. Therefore, this initiative from the BSE is appropriate from the perspective of market integrity.

BSE said that a security placed under add-on price band framework will remain in the framework for a minimum period of 30 calendar days and will be eligible to move out if it does not qualify the provisions of the framework thereafter.

The new framework will come into effect from August 23, the exchange said.

The exchange said that review of the shortlisted securities under the framework — inclusion or exclusion — will be carried out on monthly basis.

It further said that shortlisting of securities under framework is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company.

“In case of corporate actions of a material nature, like rights issue, bonus issue, merger, amalgamation, takeover etc. the framework shall be applicable on the new adjusted base price.”

BSE said that the framework will be in addition to all other prevailing surveillance measures being imposed by the exchanges from time to time.

Further, the exchange has identified an initial list of 31 securities on which the framework will be applicable with effect from August 23.

These companies include Ashiana Agro Industries Ltd, Cosmo Ferrites Ltd,Garware Synthetics Ltd, Saraswati Commercial India Ltd, Texel Industries Ltd, Siel Financial Services Ltd and Pan Electronics India Ltd.

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