Operator activity in small- and mid-cap stocks is growing. According to market players, this is evident by the large number of companies frequently being moved in and out of the trade-to-trade (T-T) category, under which scrips are monitored by exchanges for price manipulation.
BSE on Monday moved 74 stocks to the T-T group as a surveillance measure and removed 298 stocks out of this category. Removing stocks from the T-T category does not mean that the exchanges did not find manipulation in any of the scrip, say brokers. It has more to do with the particular stock not falling under the criteria specified by exchanges for keeping the scrip in the T-T segment any longer. While exchanges have criteria for the T-T segment, the base of it is unusual price movement.
After Monday’s action, more than 350 stocks on BSE still remain under surveillance. Experts say exchanges should make it public as to what action they initiated against a stock or their negative findings in the counter while the scrip was under the T-T category. This is a price sensitive information and its dissemination will bring transparency. Stock exchanges ask all companies to disclose price sensitive information for the welfare of shareholders and they should follow the same, experts say.
| UNDER THE LENS BSE price in Rs | ||
| 28-Aug-12 | %chg* | |
| SKS Microfinance | 110.45 | -8.07 |
| Wockhardt | 1,115.20 | -7.43 |
| High Energy Batteries | 158.55 | -4.97 |
| Ashapura Minechem | 28.70 | -4.97 |
| Kemrock Industries | 135.90 | -4.97 |
| Reliance Broadcast | 51.70 | -4.96 |
| Glodyne Technoserve | 78.84 | -4.95 |
| *Change over previous day Data compiled by BS Research Bureau | ||
On Monday, stocks put under surveillance included Reliance Broadcast Network, Wockhardt, SKS Microfinance and Birla Cotsyn, among other prominent companies. Price spike in some of the non T-T stocks, including Ashapura Minechem and High Energy Batteries, which was reported last week, too, were put under surveillance by BSE. While circuit filter in stocks like Glodyne Technoserve and Kemrock Industries have been reduced to five per cent they remain out of surveillance.
The share price of Kemrock Industries crashed from Rs 465 to Rs 135 in less than a month. Glodyne Technoserve has been on a crash course after rumours of an Intelligence Bureau report did the rounds of the market last month. The stock is down more than 80 per cent from a high of Rs 434 in May and was traded at Rs 78 on Tuesday on BSE. The stock is down nearly 20 per cent after its promoter Anand Sarnaaik sold over two per cent holding in the company this month.
BSE has started giving out more details regarding their surveillance. The exchange says surveillance activities are allocated to three cells including price monitoring, investigations and position monitoring (with reference to trading member position). The exchange undertakes a fortnightly and quarterly review of stocks before moving these to the T-T category. Both BSE and the National Stock Exchange follow three broad criteria of price to earnings, price variation and market capitalisation for putting scrips under surveillance.
Under the T-T segment, only delivery-based trading can be done and 100 per cent value at risk margin is collected by exchanges. Operators try to influence the timing of scrips going in and out of the T-T segment as they work on the margin funding model and financiers do not fund T-T group stocks.