Smallcap, midcap stocks recover to some extent after heavy selling

By: |
August 11, 2021 7:18 PM

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

Sensex, NiftySo far this year, the smallcap index has gained 7,751.09 points or 42.82 per cent, while the midcap has jumped 4,769.53 points or 26.58 per cent

Smallcap and midcap stocks continued to tumble on Wednesday following the BSE’s new surveillance measure but later recovered some of the lost ground after the exchange clarified that the additional price limits would be applicable only to certain stocks having market capitalisation of less than Rs 1,000 crore.

During the day, the smallcap index tumbled 3.30 per cent and the midcap index plunged 2.15 per cent. At close, the BSE smallcap index dipped 216.75 points or 0.83 per cent, while the midcap index declined 51.09 points or 0.22 per cent.

The 30-share BSE benchmark closed lower by 28.73 points or 0.05 per cent.

To curb excessive volatility in mid and smallcap 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.

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.

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.

Mohit Nigam, Head – PMS, Hem Securities said, “Benchmark indices closed on a flat note amid high volatility. Midcaps and smallcaps have recovered sharply after BSE’s clarification in the new rule for add-on price band framework, this new rule triggered a major sell off in smallcap and midcap stocks today and yesterday.”

On Tuesday also, smallcap and midcap indices faced severe drubbing as they tumbled up to 2 per cent on profit-booking by investors.

The smallcap index had reached its lifetime high of 27,323.18 points on August 4 this year. The midcap index had also touched its all-time high of 23,478.8 points on the same day.

So far this year, the smallcap index has gained 7,751.09 points or 42.82 per cent, while the midcap has jumped 4,769.53 points or 26.58 per cent.

In contrast, the BSE benchmark has rallied 6,774.6 points or 14.18 per cent so far this year.

“Nifty opened positive but witnessed profit-booking. It staged a strong recovery from intra day low levels to finally close on a flat note, post the clarity on newly enacted rules from BSE helped recover some losses. Midcaps and the smallcaps were brutally hammered over last two days which did recover somewhat post the clarity,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

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