BSE’s surveillance measure to curb volatility in mid, small cap stocks

New Delhi, August 11

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, the 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.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the BSE’s new surveillance framework with add-on price bands for specified stocks listed exclusively on 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.

The BSE said 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. — PTI

Add-on price band framework

It will be applicable to companies with a market capitalisation of less than Rs1,000 crore and on securities in groups X, XT, Z, ZP, ZY, and Y
Under the framework, 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