Mid- and small-cap stocks managed to trim some of their losses on Wednesday after the BSE clarified that its new price cap rule will be applicable to securities priced ₹10 or more, and listed entities with a market capitalisation of less than ₹1,000 crore.

To further assuage concerns among retail investors, the BSE identified an initial list of 31 securities on which the framework will be applicable with effect from August 23. It has also reduced the minimum period for which a security can be placed in the framework from 90 days to 30.

On Monday, the BSE had issued a circular stating that a stock priced at ₹100 and already in the 10 per cent circuit filter category can rise only by ₹30 in a week and ₹100 in three months. Similarly, it can fall by ₹25 in a week and ₹50 in three months. It had spelt out several such caps for stocks that attract circuit filters between 2 per cent and 20 per cent.

This led to a mad rush among retail investors to get out of small- and mid-cap stocks on Tuesday. As many as 521 stocks were locked in the lower circuit, with no buy orders for them.

BSE clampdown hits small, mid-cap stocks

The clarification on Wednesday helped control the bloodbath in the broader market. The Nifty Midcap50, which had lost almost 2 per cent, closed 0.26 per cent higher.

The Nifty Small50, which had slumped 3 per cent in early trade, recovered to close with a loss of 0.59 per cent. Similarly, the BSE Midcap and the BSE Small Cap also recovered over 2 per cent and 3 per cent from day's low.

Nudges selling pressure

“Measures taken by the BSE to curb excessive price movements in smaller stocks led to the selling pressure in small- and mid-cap stocks while a clarity from the BSE on limiting its restrictions to penny stocks gave some relief,” said Vinod Nair, Head of Research at Geojit Financial Services.

Brokers said that any kind of curbs on the free movement of stock prices is a suppression of free markets and will not be accepted by investors. The BSE said that its move to cap the rise in share prices was part of additional surveillance measures.