BSE has tightened bolts, clamped down on trading activity: Deven Choksey

Avoiding markets is not a good idea. One should stay invested and selectively look at quality stocks and exit the weaker ones, he advises

A BSE circular introducing “a new surveillance framework viz. Add-on Price Band Framework” for securities listed exclusively on BSE Trading Platform dented the sentiment at the bourses, especially the mid-, and small-caps. The stocks shortlisted, the circular said, will be subjected to additional periodic price limits viz. weekly, monthly and quarterly price limits. DEVEN CHOKSEY, managing director at KR Choksey Investment Managers, tells Nikita Vashisht in an interview that stocks of weaker companies may see the correction continue, but the ones that are relatively bigger and stronger will see investor interest come back. Edited excerpts:

What is your view on the BSE circular that seeks to put in place a new surveillance framework? It has already rattled the investing community.

Investors should not be particularly worried about all this. The BSE has tightened the regulation pertaining to the mid-, and small-cap companies because they were rallying in the market due to heightened trader’s activity. I think there is more activity happening at the behest of the traders rather than the actual investors and it was obvious that some corrective action had to be taken. That’s what the BSE has done, which is to tighten the bolts and clamp down on such ‘trading’ activity. 

So, will these measures have a material impact on volumes and the overall trading activity?

The measures, I believe, will not have material impact. That said, in the current situation, the fall is happening more so because most players were overbought into these counters. Hence, they offloaded in the backdrop of the new regulation by the BSE. Mid-and small-caps always carry such risks as a number of these counters may/not be liquid enough to give investors an exit opportunity. 

Will the correction continue even if the BSE was to withdraw this circular? As it is, valuations are a concern in the mid-and small-cap universe?

As regards the road ahead, stocks of weaker companies may see the correction continue, but the ones that are relatively bigger and stronger will see investor interest come back.

From a larger perspective, should long-term investors stay put now or is it time to take some money off the table / avoid markets?

Avoiding markets is not a good idea. One should stay invested and selectively look at quality stocks and exit the weaker ones.