NSE announces revision in criteria for shifting scrips to/from Trade for Trade segment

Stock market regulator Securities & Exchange Board of India (Sebi) and the stock exchanges have decided to revise the criteria and periodicity for shifting of scrips to and from Trade for Trade Segment. Henceforth, the process of identifying the scrips for moving to/from Trade to Trade will be done on a monthly basis along with the price band review process, which too shall be done on a monthly basis instead of Bi-monthly basis, the National Stock Exchange (NSE) said in a circular issued on Wednesday, 25 June 2014.

It was decided that on the date of the review for shifting to/from Trade to Trade, the scrip should be in 5% price band for at least 22 trading days. Any scrip satisfying any one of the four criteria on the date of review shall be shifted to trade for trade. One such criteria is Price Earnings Multiple (P/E) less than 0 or greater than or equal to upper limit subject to a minimum of 25 as on the relevant date, price variation greater than or equal to 20% plus Sectoral Index/CNX 500 variation in the last 22 trading days (subject to a minimum of 10%) and volatility greater than three times Nifty volatility over a period of three months. Volatility is computed as standard deviation of log normal close to close returns. If Nifty P/E on the relevant date is in the range of 15-20, then the upper limit will be 30. If Nifty P/E is more than 20 or less than 15, the difference will be rounded off to nearest number will be added to or subtracted from 30.

The second criteria is Price Earnings Multiple (P/E) greater than 0 but less than the upper limit subject to a minimum of 25 as on the relevant date, price variation greater than or equal to 40% plus Sectoral Index/CNX 500 variation in the last 22 trading days and volatility greater than three times Nifty volatility over a period of three months.

There is another criterion applicable to scrips with a market capitalization of less than 2 times of the market capitalization arrived at for the review. The criteria for such stocks is average daily volume variation month over month greater than 200% plus average volume variation of CNX 500 constituents, concentration (Gross Purchase plus Gross Sales) of top 10 clients on the basis of PAN during the month more than 25% and price variation greater than or equal to 20% plus Sectoral Index/CNX 500 variation in the last 22 trading days, subject to a minimum of 10%.

The last criterion is number of non promoter shareholders less than 500 as per the latest shareholding pattern available with the stock exchange.

It has been decided that these criteria for shifting to/from Trade to Trade will be implemented in two phases. The adoption of sectoral indices for comparing price variation in scrips will be implemented with effect from 30 June 2014. As part of the second phase of implementation, the criterion for shifting of scrips into Trade for Trade would be applied only on scrips trading under a 5% price band for a minimum of 22 days. The same would be applicable with effect from August 2014. Scrips moving out of Trade for Trade segment would be placed under 5% price band until the next review for upward revision of price bands, NSE said in circular.

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