To safeguard interests of investors, leading stock exchanges BSE and NSE have asked their trading members to take extra caution while trading in over 300 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 as compared to frequently traded shares.
In similar-worded circulars issued on Wednesday, both exchanges 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 299 and 13 illiquid stocks, respectively, where additional due diligence is required.
Illiquid scrips listed by BSE include Garware Marine Industries Ltd, Mefcom Capital Markets Ltd, Ekam Leasing & Finance Company Ltd, Maruti Securities Ltd, Bangalore Fort Farms Ltd, Gujarat Investa Ltd, Golechha Global Finance Ltd, Vertex Securities Ltd, Munoth Financial Services Ltd and Indo Asia Finance Ltd.
The 13 stocks identified by NSE are: Bkm Industries, BSEL Infrastructure Realty, Creative Eye, Eurotex Industries and Exports, Grand Foundry, Gujarat Lease Financing, GTN Textiles, Hotel Rugby, Kaushalya Infrastructure Development Corporation, Nagreeka Capital & Infrastructure, Norben Tea & Exports, Neueon Towers and TCI Finance.
Based on the trading activity during the period October 1, 2020 to March 31, 2021, these scrips which will be traded in periodic call auction mechanism from April 12, 2021, the exchanges said in circulars.
The criteria for shifting securities in periodic call auction mechanism is decided in consultation with Securities and Exchange Board of India (Sebi) and applied uniformly across the stock exchanges and reviewed periodically.
In December 2014, the market regulator 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.