Why small-cap and mid-cap stocks are falling?|BSE new circular

If you are active in the stock market you must know small-cap and mid-cap stocks are falling for the last 3 days. So what is there to panic for small-cap and mid-cap investors? this is all because of a new circular 31 that BSE has issued which is about surveillance measures, So shall you exit from small-cap and mid-cap stocks? let’s discuss it

What are the Surveillance measures of BSE or NSE?

The stocks exchanges of India NSE and BSE make surveillance measures on stocks that show unusual movements say many upper circuits or lower circuits. There are different surveillance measures that stock exchanges take among which the most popular two are: Additional Surveillance measures (ASM) and Graded Surveillance Measures (GSM)

What is the new BSE circular on upper and lower circuits?

BSE already has circuit filters(upper and lower) from 5 to 20 % price band. But on Monday 9 August 2021 BSE released a new circular which states that a new circuit price band will be available for a larger period. This limit will be on the current circuit limit categorized into weekly, monthly, and quarterly. let’s solve it with an example :

Say company ABC is trading at Rs 100 with a current circuit limit of 20% which means the share price can fall up to 20% and gain up to 20% a day after which the price will be 80 to 120, Now according to the new BSE rules new price band will be :

1.Weekly circuit would be 1.6x (Upper) and 0.6x (Lower) which means ABC company share price can be 160 on the upper side and 60 on the lower side in a whole week

2.Monthly circuit could be 2x (Upper) and 0.5x (Lower) which means ABC company share price can be 200 on the upper band and 50 on the lower band of the circuit on a whole month

3.Quarterly circuit would be 3x (Upper) and 0.3x (Lower) which means ABC company share price can be 300 on the upper band and 30 on the lower band in a whole quarter of 3 months

Small-cap stocks identified by BSE under Surveillance Measures New Rule

Below is the List of 31 Small-cap stocks identified by BSE under the Surveillance Measures New Rule applicable from the 3rd week of August 2021. This list would get updated with additions/removals periodically.

  1. Anjani Foods Ltd
  2. Ashiana Agro Industries Ltd
  3. Assam Entrade Ltd
  4. Available Finance Ltd
  5. AVI Polymers Ltd
  6. B&A Packaging India Ltd
  7. Cosmo Ferrites Ltd
  8. Flomic Global Logistics Ltd
  9. Garware Synthetics Ltd
  10. Gita Renewable Energy Ltd
  11. Gopala Polyplast Ltd
  12. Halder Venture Ltd
  13. Hazoor Multi Projects Ltd
  14. IEL Ltd
  15. Jaykay Enterprises Ltd
  16. LWS Knitwear Ltd
  17. Master Trust Ltd
  18. One Global Service Provider Ltd
  19. Pacheli Industrial Finance Ltd
  20. Pan Electronics India Ltd
  21. Pooja Entertainment and Films Ltd
  22. S & T Corporation Ltd
  23. Sangam Renewables Ltd
  24. Saraswati Commercial India Ltd
  25. Sarthak Industries Ltd
  26. SC Agrotech Ltd
  27. Shree Worstex Ltd
  28. Shri Bajrang Alliance Ltd
  29. Siel Financial Services Ltd
  30. Svarnim Trade Udyog Ltd
  31. Texel Industries Ltd

Mid-cap stocks identified by BSE under Surveillance Measures New Rule

The list is yet to be released by the Bombay stock exchange (BSE)

What happens if such mid cap or small cap stock touches the circuit limit?

If someone wants to sell, they need to sell at a lower circuit if buyers are there, else they need to wait for the next circuit limit. Once this add-on price band circuit is reached, there would not be any further trades beyond this price. Means your money would be stuck as there are no buyers even if you want to sell at a lower price.

If you are holding any of the above-listed stocks and want to sell at market price, there should be buyers. If it hits the lower circuit, there is no way you can sell them.

What should Investors of small-cap under the list of new BSE rules do?

Those who are for long term investments in these stocks should not worry at all and those who entered for a swing call or positional call must think once before the rules are applied

And there is a note that This circular is specific to BSE listed stocks only. If such midcap or smallcap stock is listed on both BSE and NSE, these would not come under new BSE circular surveillance guidelines. NSE said there is no such plan to implement for the stocks listed on their stock exchange as of now. Hence, if you are investing in midcap or small-cap stocks listed on NSE and BSE, there are fewer chances that your portfolio might get impacted with such a new circular.

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