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Mumbai, May 24 The Bombay Stock Exchange has cautioned investors against dealing in Z category scrips without performing due diligence on them, in the light of the unrealistic price rise recorded by KGN Industries and Sylph Technologies last week.

“The investing public is requested to note the quality of companies, especially the group in which the scrip is placed at the Exchange before dealing in such scrips. If a sudden spurt in the volume/price is noticed, please exercise caution while dealing in such stocks,” said a BSE media release issued late on Friday evening.

“The Exchange will take appropriate action including suspension of trading in the scrips if the companies are found to be involved or acting in collusion with any person to defraud investors.”

Ahmedabad-based KGN Industries rose to a high of Rs 55,000 last week when trading commenced in the scrip, which was relisting after a gap of seven years. A day later, Indore-based Sylph Technologies, also relisting after seven years, witnessed a sudden spurt to Rs 800 under similar circumstances.

On the opening day of trading of a scrip post the revocation of its suspension, there are no price bands in order to allow the market to discover the price of the scrip.

The liquidity in these scrips is very low. In the matter of both the scrips, very small quantities were traded, against the total public float.

“While some of the companies may have improved fundamentally and financially, there may be companies which may not have any such improvement in their business activity to support the significant price rise,” observed BSE.

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