The Hindu Business Line : Panic selling as stocks put under trade-to-trade segment

THE BSE and NSE decision to bring stocks under the Z category and trade-to-trade segment had an immediate impact on these stocks with the stock price of most of the companies falling in Tuesday's trading.

Brokers said panic selling in these stocks was on the possibility of speculation in these stock will come down sharply after they are put into the trade to trade segment. Under this segment, if an investor buys 1,000 shares of a company and sells similar quantity on the same day, then he has to pay for 1,000 shares bought and give delivery for the shares sold by him rather than squaring-off these two transactions.

The decision of BSE to bring over 600 stocks under the Z category and NSE to put over 100 stocks under the trade to trade segment was seen from several stocks hitting the lower circuit and the advance-decline ratio. For instance, on BSE there were 133 stocks from the B-2 group that hit the lower circuit, out of 163 stocks in the lower circuit. Of these stocks, most of them have been placed in the Z category and trade to trade segment. In addition, there were 1,460 stocks that declined on Tuesday compared to Monday's closing while 554 stocks advanced.

Some of the stocks that are put in the Z category and saw selling included DCM Ltd, Williamson Magor, Harrison Malayalam, Flex Engineering, JMT Auto, JCT, Jenson & Nicholson and several others.

Brokers said the upward movement in these small cap and illiquid stock has already come down. However, they said this would have an adverse impact on the overall market as some of the players that have huge positions in these stocks would start booking profit in frontline stocks in order to recover part of their money from the Z category.

Most of the brokers said further selling is likely to be seen during the week as these stocks have been put into trade to trade segment from tomorrow. ``Liquidity in these stocks will fall sharply and also the stock price as investors will like to exit from these stocks,'' said a dealer .

However, most of the brokers said the decision of the exchanges to put these stocks in trade-to-trade segment is good as small investors will not get stuck in stocks of companies that have no fundamentals.

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