11 Aug , 2021 By : Kanchan Joshi
Indian broader markets witnessed a sharp and sudden selloff in the past two trading sessions which the market participants attributed to profit-booking and also, the new BSE rule on additional surveillance that intends to curb excessive price movement in securities listed on BSE trading platform. Midcap and smallcap stocks trimmed their losses on Wednesday after the exchange issued a clarification on the new circular.
From the recent correction, analysts expect the broader market to rebound. Santosh Meena , Head of Research, Swastika Investmart said that the BSE Circular is just an excuse for a correction in the midcap and smallcap space because this circular is limited to few BSE stocks and it won't have any meaningful impact on the overall market.
''We are in a structural bull market where this kind of shakeout phase will be part of this journey. The correction in midcap and smallcap space was started at the beginning of August month and it gets momentum in the last two trading sessions which have taken out lots of weak hands therefore we may see a bounce back from here,'' Meena added.
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 Rs1,000 crore. The new measure, add-on price band framework, 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, BSE said in a circular on Wednesday.
Under the framework, the shortlisted securities will be subjected to additional periodic price limits of weekly, monthly and quarterly. These add-on price bands will be in addition to the applicable daily price bands of such securities. The new framework will come into effect from August 23.
On BSE's clarication on 'Add-on Price Band Framework', Vk Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, that the new surveillance framework for specified stocks listed exclusively on the BSE is a timely initiative to curb excessive speculative activity in these stocks.
He added that many stocks in this segment have low liquidity and, therefore, are capable of being manipulated by a group of traders. ''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,'' Vijayakumar added.
0 Comment