B group trade at a trickle

The volume and value of stocks traded in the B1, B2 and Z groups have crashed "" and they tumbled after the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) shifted 555 stocks from various groups to the trade-to-trade category (where all trades have to be settled and no netting is possible).

A Business Standard Research Bureau study on the stocks traded on the BSE shows that the volume and prices of index stocks traded in the derivatives segment are climbing whereas stocks traded in the B1 and B2 groups are on a decline.

All this suggests preventive action by the exchanges has had a damping effect on prices and volumes of non-A group stocks.

After 555 stocks were shifted on September 10 to the trade-to-trade segment, the aggregate volume of these stocks fell 80 per cent, compared with their one-month aggregate volume prior to the shift.

Eventually, with investor preferences shifting to frontline blue chip stocks, the volumes in B1 and B2 groups has fallen sharply. The B1 group reported a 47 per cent drop while the B2 group recorded a 51 per cent decline in trading volume since September 10, 2003.

The aggregate volume of Z group stocks declined from 443.7 million equity shares (between August 10 and September 9) before the shift to 92.3 million equity shares in the one-month period after the shift (September 10 to October 10).

During the period, the aggregate volume of A group stocks declined by a marginal 4 per cent in contrast. As a result, the market share of A group stocks in the total BSE traded volumes increased to 63 per cent from 45 per cent earlier.

After the shift, the market value of Z group stocks also declined by almost 10 per cent, whereas A group stocks appreciated by 6 per cent and B1 group stocks gained 7.25 per cent. During the same period, the BSE Sensex gained 7.77 per cent.