The Hindu Business Line : Low-priced stocks steal the show on bourses

Chennai, Dec. 31 The last day of the year on the stock markets saw low-priced stocks become the life and soul of the party, with a surge in retail investor interest.

For the first time in recent months, the number of stocks that hit the upper circuit breached the 1,000 mark on Monday, to touch 1,223 for the day; just 19 stocks hit the lower circuit filter.

his suggests that almost every second stock that was traded on the BSE hit the permissible limit during the day. The total number of stocks traded on the BSE was 2,904.

The BSE Sensex today gained 80 points or 0.40 per cent. For 2007, it gained 47 per cent. The NSE’s S&P CNX Nifty moved up 0.97 per cent. On the other hand, the BSE Midcap jumped 2.24 per cent and the BSE Small-Cap flared up by 3.47 per cent.

The Securities and Exchange Board of India guidelines require the exchanges to apply a daily circuit filter to all stocks, except on those where derivative products are available or are included in the indices on which derivative products are available. If one considers the stocks trading in F&O segment, the figure could be even much higher, say market players.

The imposition of circuit filters on stocks ensures that the price of the scrip cannot move upward or downward beyond the limit set for a day.

The maximum the stock can move on any day is 20 per cent for the non-F&O stocks. “Circuit filters are reduced in the case of illiquid scrips or as a price containment measure. The circuit filters are reduced to 10 per cent or 5 per cent or 2 per cent, as the case may be, based on the criteria decided by the department,” says the BSE Web site.

Movement in T-group stocks

The number of stocks that have been hitting the upper circuit has been increasing in recent sessions. Interestingly, on Monday, 457 stocks from the T-group, which requires compulsory delivery at the time of buying/selling stocks, hit the upper circuit, followed by B2-Group, which accounted for 362 stocks.

Brokers said that the day’s trading at both the exchanges indicated rising interest in small-cap stocks, particularly those quoting below Rs 10. According to market participants, though the benchmarks — the BSE Sensex and the NSE Nifty — have been witnessing some pressure at higher levels, the story has been different for small- and mid-cap indices, as they continued their relentless upward march.

Mr Sailav Kaji of PINC Research, said: “In the whole of 2007, the rally was dominated by large-cap stocks. Mid- and small-cap stocks did not participate when the Sensex moved up from 15,500 to 20,000 except for power, real-estate and capital goods sector.

And now the rally is spreading to mid and small-cap stocks, as the valuations are catching up,” said Mr Sailva Kaji. According to Mr Arun Kejriwal of KRIS Securities,

“Today being last trading day of the year, an NAV-propping exercise may also have helped the trend of stocks hitting the roof. This has brought a lot of cheer to retail investors .”

However, prominent traders do advise investors to stay off little known stocks. “Though the rally is likely to continue in the mid and small-cap space for some more time, one has to avoid junk stocks and should invest after thorough investigation," Mr Kejriwal added.

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