BSE to shift 33 stocks to 'T' segment, advising members to exercise caution while trading in these shares

Speculators seem to thrive in all market conditions; or, so it appears from the surge in stocks of several lesser known, fundamentally weak companies despite a bearish undertone.

Though the the jump in penny stocks is not as alarming as in a bull run, it’s a phenomenon that continues to resurface. In some pockets of the market, it’s becoming a cause for concern.

In order to protect interest of smaller investors, bourses are taking preventive action to check abnormal movement in prices.

In its latest move, the Bombay Stock Exchange has decided to shift 33 stocks to the trade-totrade or trade-to-trade segment as part of its surveillance measures. The exchange has advised its members to exercise caution while trading in these shares as settlement will be done on tradeto-trade basis.

This means any transaction will result in compulsory delivery of shares and no squaring off positions will be allowed. Also, circuit filter — the price limits within which a stock can move — is capped at 5% or lower, thereby restricting intra-day fluctuations.

“There is a possibility that some of the promoters want to raise money by placing shares at higher price,” said Kisan Choksey, chairman of KR Choksey Shares and Securities. “Our major weakness is the lack of many good quality promoters who can be trusted for their professionalism and high standard of governance. Such promoters have a tendency to get involved in speculative activity for their own benefits,” said Choksey.

Shifting of a stock to trade-totrade group is a surveillance measure, which is taken after studying the trading pattern (price movement, volumes, parties involved in trading) in the shares. “Surveillance departments of the stock exchanges monitor if the same trading pattern is repeated with involvement of the same of set of people in trading of a particular stock. Based on their observations, a stock is selected for a preventive action in the interest of investors at large,” said Satco Securities CEO ST Gerela.

“Mostly, share price is manipulated in connivance with promoters who want to benefit from the gains either to exit at higher levels or to raise funds from prospective investors,” said Gerela, who previously headed the BSE surveillance department.

According to stock brokers, an increasing number of stocks are being shifted to the ‘T’ group after a sharp rise in the prices which can be attributed to speculative activity, particularly where the gains are not supported by any significant change in fundamentals of the concerned companies.

Moschip Semiconductor, Futura Polyesters, Gayatri Sugars, Kilburn Office, Intensive Air Systems, Gagan Gases, Odyssey Technologies and Unique Organics are some of the top gainers among penny stocks, including a few which are part of the 33 being shifted to the trade-to-trade group from Friday.

They have risen between 21% and 33% against a 4.5% fall in the Sensex since May 2.