Trade cautiously in over 400 illiquid stocks: BSE, NSE

To safeguard investor interest, stock exchanges NSE and BSE have advised members to take extra caution while trading in more than 400 illiquid stocks.

Illiquid stocks are those that cannot be sold easily because they see limited trading. These stocks pose higher risks to investors because it is difficult to find buyers for them compared to frequently traded shares.

In similar-worded circulars, the two bourses advised their trading members "to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients."

BSE and NSE have listed out 375 and 34 illiquid stocks, respectively, where additional due diligence is required.

Illiquid scrips listed by both the exchanges include Usha Martin Education & Solutions, Pradip Overseas, Gujarat Lease Financing, Khaitan (India), Zenith Birla (India) and Todays Writing Instruments.

The exchanges said periodic call auction will be conducted in these 409 securities with effect from April 11 and the decision is based on trading activity of these scrips during the period October 1, 2015 to March 31, 2016.

In December 2014, capital markets regulator Sebi had relaxed norms for trading in illiquid stocks. The move was aimed at shifting various illiquid scrips to normal trading session from the periodic call auction, the window where these stocks are currently traded.