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Exchange-sponsored research fails to boost liquidity

Mehul Shah  |  Mumbai 

Sponsored research from India’s two premier stock exchanges – the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) – has failed to boost volumes of stocks of the researched companies.

At present, NSE is providing sponsored research on its website from Crisil on eight companies — KSE Ltd, GKB Ophthalmics Ltd, KLRF Ltd, Beardsell Ltd, Hydro S & S Industries Ltd, Jumbo Bag Ltd, Wendt (India) Ltd and West Coast Paper Mills Ltd.

According to NSE, providing independent equity research on these companies has improved liquidity, enhanced visibility across investors and increased transparency. NSE started providing sponsored research since May this year.

However, the average volume data on NSE over the last five months showed that there was no improvement in liquidity in six out of these eight stocks, according to the BS Research Bureau.

For three stocks – Wendt, Beardsell and KSE – the average daily volume in August is less than 1,000 shares. For Jumbo Bag and GKB Ophthalmics, the average daily volume in August is less than 10,000 shares. On the other hand, two stocks – KLRF and Hydro S&S – has seen an increase in volume.

BSE is providing sponsored research from ICRA Online on its website on 20 companies since July. Of these, 14 companies have not shown any significant improvement in liquidity. Five of these stocks – Ess Dee Aluminium, Simplex Infrastructures, Supreme Industries, Unichem Laboratories and Kansai Nerolac – have daily average volumes of less than 10,000 in August. “Not many investors are aware about this initiative,” said Jagannadham Thunuguntla, equity head at Delhi-based SMC Capitals.

Unlike NSE, BSE is giving independent research on some known names like NHPC, ABG Shipyard, Hindustan Oil Exploration and Everest Kanto. These stocks are already tracked by some broking firms and the exchange-sponsored research has not resulted in major improvement in liquidity in these counters.

First Published: Thu, August 12 2010. 00:30 IST
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