Home / Markets / Stock Markets /  BSE clarifies on surveillance measures to curb stock volatility

MUMBAI : BSE on Wednesday issued a clarification on surveillance measures following a previous circular which rattled investors leading to a sell-off in mid and small cap stocks. The stock exchange has said that the surveillance measure framework is restricted to only those stocks which meet the certain criteria and will be applicable from 23 August.

BSE said that the new framework is applicable to BSE exclusive securities in groups such as X, XT, Z, ZP, ZY, Y. The new measure applies to securities which have a price of 10 and more as on review date while the market capitalization should be less than 1000 crore.

“Accordingly, the shortlisted securities shall have 6 monthly, 1 yearly, 2 yearly and 3 yearly price band in place of weekly, monthly, quarterly price band," BSE said in a circular.

A security placed in add-on price band framework shall remain in the framework for a minimum period of 30 calendar days and shall be eligible to move out if it does not qualify the provisions of the above framework thereafter. Review of the shortlisted securities under the framework i.e. inclusion/exclusion shall be carried out on monthly basis. The add-on price bands shall be in addition to the applicable daily price bands of such securities, BSE said.

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.The exchange has released a 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.

Earlier on 9 August, BSE said in a circular that exchanges in consultation with Securities and Exchange Board of India (Sebi), have introduced surveillance measures such as Graded Surveillance Measures (GSM), Additional Surveillance Measure (LT-ASM), Short-Term Additional Surveillance Measure (ST-ASM), Trade for Trade (TT) etc.

“In continuation with our endeavour to maintain market integrity and curb excessive price movement in securities listed exclusively on BSE Trading Platform, a need has been felt to further strengthen the extant surveillance measures. Accordingly, a new surveillance framework viz. add-on price band framework is being introduced by the Exchange for securities listed exclusively on BSE Trading platform," BSE said.

Fearing impact of the new measures, BSE Small and BSE Midcap indices slipped 2-4% in the last three days. However, analysts said that it is a knee jerk reaction and a correction in this segment was due as these stocks have seen a massive rally especially post pandemic outbreak in March 2020.

“Both mid and smallcap segments have jumped significantly in the last 1.5 years and a correction was due. The BSE circuit will not impact all stocks, hence there is no reason to be worried," said Deepak Jasani, retail research head, HDFC Securities.

Since March last year, BSE Midcap and BSE Smallcap indices jumped 134% and 192% respectively outpacing gain of 110% of Sensex and 114% of Nifty. In 2021 so far, BSE Midcap surged 26% while BSE Smallcap rose 43% whereas Sensex was up 14% and Nifty 16%. However, in August so far, both BSE Midcap and BSE Smallcap were down 2-3.5% compared to gains of 3-4% of Sensex and Nifty.

“The BSE measures on add on price framework should just impact a handful of stocks which are exclusively listed on BSE. Much of the sell-off in the last two days was a panic reaction and is likely to be resolved soon," said Abhilash Pagaria, analyst, Edelweiss Securities.

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