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The Securities and Exchange Board of India (Sebi)’s decision to relax trading norms for illiquid stocks fuelled a rally in mid- and small-cap stocks on Monday, the second day in a row.
The BSE mid- and small-cap indices rose 1.2 per cent each on Monday, while the broad-market Sensex rose just 0.1 per cent. The BSE Sensex closed at 21,101, while the NSE Nifty closed at 6,284.
Analysts said the Sebi move boosted interest among investors, as a lot of good companies would now trade through the regular window. “Two-thirds of the companies in the list will now be freed and available for trading on the regular counters. This is a good move for investors,” said Arun Kejriwal, founder, KRIS Research.
“Some of these companies were included in the list of illiquid stocks because they had low volumes, which was unfair. But the recent Sebi regulation could help revive interest in these stocks and boost their performance,” said Sunil Jain, vice-president (equity research), Nirmal Bang Securities.
In an order on last Friday, Sebi had said companies fulfilling any of the three norms regarding profitability, dividend pay-outs or market-cap would be excluded from the list of illiquid stocks.
In April, the markets regulator had asked exchanges to identify thinly-traded stocks and open special trading windows, called periodic call auction sessions, for 15 minutes during each trading hour. This was to curb manipulation in thinly-traded stocks. However, this proved counter-productive, said market participants, as trading volumes dropped sharply and, in some cases, came to a complete halt.
Trading volumes, which had declined after the periodic call auction system was implemented, would also be restored, analysts said.
“The market sentiment has improved a lot in the last few days, with the Nifty having touched its all-time high. We are seeing interest coming back among investors, particularly the HNI (high net worth) segment, but it is still lower than what it was during 2008,” said Ravi Shenoy, vive-president (midcaps research), Motilal Oswal Securities.
Some in the market said the rise in stock prices was due to the valuation gap between the large and the small- & mid-cap segments. Large-cap stocks have benefited from the recent rally in the markets. Now, investors are looking to book profits and are scouting for opportunities in the mid- and small-cap segment.
The market sentiment around blue-chip stocks, typically the favourite of foreign institutional investors (FIIs), remained tentative, following buzz of basket-selling by a leading FII. The entity is said to have sold shares worth Rs 100 crore on Monday.
