BSE aims to boost liquidity; decision affects 18% IndoNext companies.
In a move to add liquidity, the Bombay Stock Exchange (BSE) has transferred nearly 18 per cent companies listed on the BSE IndoNext platform to its main trading floor in the ‘B’ group. BSE Indonext, launched by then Finance Minister P Chidambaram in 2007, was specially created to cater to small and midsized companies listed on regional stock exchanges.
Since the regional stock exchanges were unable to attract trader attention due to a lack of advanced technology, BSE tried to give them a new lease of life under the new platform. The companies listed on BSE IndoNext, however, did not attract much market participation either. The average daily turnover generated by this group was around 3-5 per cent on BSE.
Trading interest was low in these counters due to a lack of funding. A majority of the trading positions in the equity markets are through margin funding and brokers give money to trade only in ‘A’ or ‘B’ group shares, which are considered relatively liquid counters against those in other groups. Scrips under ‘T’ and ‘TS’ groups are under the scanner of the exchanges for unusual trading patterns and brokers mainly advise their clients to stay away from stocks under these categories.
The BSE transferred 485 out of 2,745 companies listed on BSE IndoNext. Companies listed on 18 regional stock exchanges were traded on BSE IndoNext. According to a top BSE official, the exchange is in the process of rationalisnig various groups.
“Margin funding in these counters will now pick up as the brokers will start accepting these stocks as collateral,” said Kishor Ostwal, managing director of CNI Global Research.
While BSE could pass off as the largest stock exchange in the world in terms of companies listed on its platform, it is struggling to get more liquidity. In all, the exchange has 7,792 scrips, of which around 1,600 companies are suspended and around 1,900 are classified as illiquid counters not traded actively. BSE has 25-30 per cent shares in the equity cash segment against its only rival, the National Stock Exchange.