Apart from the widely known BSE Ltd and the National Stock Exchange (NSE), which have trading terminals across the country, there are 23 other stock exchanges in India. These are regional exchanges which were set up long ago to help companies operating in those regions to raise money.
What’s their current status?
For the past decade or so, regional exchanges have been facing the danger of being wiped out. The trading licence of eight of the 23 regional exchanges has already expired. Stakeholders of these exchanges are looking to exit, but are finding it difficult due to lack of proper guidelines.
Over time, these exchanges have lost trading volumes with bigger companies moving to NSE and BSE, which offer hi-tech trading. A quick glance at the handbook of statistics on the website of the Securities and Exchange Board of India (Sebi) shows that trading volume in most of these regional exchanges is minuscule and in most cases nil.
Which stocks are listed on them?
There are quite a few stocks listed on these exchanges. Most of these are the ones that were listed at the time when it was mandatory for companies to list on regional exchanges. After Sebi withdrew this mandate in 2003, no new listings have happened. Some of the companies listed on regional exchanges are also listed on NSE and BSE.
Should you invest?
Not at all. In fact, existing customers are finding it difficult to exit the stocks even at a loss in the absence of regular trading activity.
Any company that fulfils the eligibility criteria of the bigger exchanges can directly get listed with them. So the ones which are left with the regional exchanges are small companies and there are few takers for their shares. For example, there are around 2,000 companies listed on the Ahmedabad Stock Exchange. However, most of these companies are worth Rs 5-10 crore.
Analysts say stocks listed only on the regional exchanges are not fundamentally strong. A majority of the stocks listed on these have businesses limited to only those regions and are, hence, reluctant to get listed on the bigger exchanges. They don’t even have proven track record and few analyst track them. Also, these shares have low security as the companies are lesser known. There have been cases, where companies have vanished overnight after collecting money.
It is best to stay away from them. Existing investors should exit at the first opportunity even if it means off-market trade.