Sebi Seeks Bse Plan To Tackle B1, B2 Volume Snag

The Securities and Exchange Board of India has sought a plan from the Bombay Stock Exchange to overcome the low daily volumes in the B1 and B2 scrips.

While Sebi is against the idea of lifting the ban on renewals in the B1 and B2 groups, the regulator is not totally averse to allowing a lengthier settlement period for the groups if that helps impart greater liquidity.

Highly placed Sebi sources said while the market regulator was aware of the problem of lack of trading in the B groups, and had asked BSE to suggest measures to tackle the issue.

In any case, we will have to take the plan and the issue to the Sebi board, Sebi sources explained. The Sebi board meets next week in Calcutta, but the B group issue is not slated to come up this time.

Sebi sources said bringing back renewals (a practice similar to the carrying forward of trades) in the B group would not be possible since that would be virtually allowing badla or forward trading in the B stocks. That is not possible to allow and would be impossible to justify, the Sebi source said.

Another alternative suggested by Sebi was to increase the list of carry-forward stocks itself to bring in more scrips., This, however, did not seem to find favour with the BSE. While allowing an increase in the length of B group settlements would go against the overall philosophy of shortening settlement cycles across the exchanges, a view can only be taken by the board once BSE submits its plan, Sebi sources said.

The secondary market is in doldrums with volumes concentrated in only a few top stocks in the specified group, and volumes dwindling by the day in the large B1 and B2 groups representing mid-cap and smaller company scrips. The BSE has been extremely concerned over the falling volumes over the past several months and has highlighted the huge fall in market capitalisation as well.

Brokers across the countrys stock exchanges say the lifting of the ban on renewals or the lengthening of the settlement period for B1 and B2 groups on BSE to a month could be the only options left to revive the sagging sentiment in the B stocks. Latest available BSE data on monthly turnovers of B1 and B2 groups, from December 1994 (before the Sebi ban on renewals) to November 1997 show a steep fall in figures, almost at an alarming rate.

From a healthy monthly turnover of Rs 6,348.46 crore in December 1994, the B1 and B2 monthly turnovers fell sharply to Rs 2,203.88 crore in January 1995 following the Sebi ban, dipping further to a disastrous Rs 132.11 crore in December 1996, before moving up to Rs 1192.62 crore in June 1997 and slipping perceptibly again to Rs 572.75 crore in November 1997.

A similar downtrend can also be seen in the average daily turnover figures for the B1 and B2 groups from December 1994 till November 1997, with average daily turnover being Rs 577.13 crore in December 1994 and the figure dropping to Rs 28.64 crore in November 1997.