The newest round from BSE that sought to cap the worth motion of choose scrips, particularly the mid-, small-cap segments, traded on the trade shouldn’t be and not using a motive. A fast calendar year-to-date worth verify on the shares from the classes put below ‘Add-on Price Band Framework’ by the BSE reveals a complete of 210 shares have seen their market worth greater than double.
Among particular person shares, SC Agrotech, Adinath Textiles, Waaree Renewable Technologies, Steel Strips Infrastructure, Unistar Multimedia, Texel Industries, Raja Bahadur International and Hindustan Everest Tools from the BSE’s X and XT group have rallied over 500 per cent throughout this era.
Topping the charts is Gita Renewable Energy, which has zoomed 3,964 per cent to Rs 272.35 now from Rs 6.7 as on December 31, 2020. The inventory hit a 52-week excessive of Rs 300 on August 11, 2021. As per the out there June 30, 2021 shareholding sample, the promoters held 73.05 per cent stake within the firm, whereas the remaining 26.95 per cent holding is with our bodies company (15.07 per cent) and particular person shareholders (9.74 per cent), information present.
In comparability, the S&P BSE Sensex has gained 14 per cent, whereas the S&P BSE Midcap and the S&P BSE Smallcap indices have rallied 26.6 per cent and 42.8 per cent, respectively, throughout the identical interval, information present.
“The BSE circular does not seem out of context as there was some froth building up in the mid-, and small-caps. In the last three – four trading sessions alone, the small-caps have lost nearly Rs 5 trillion in market-cap. There are liquidity concerns now given how the retail and other investors are lapping up initial public offers (IPOs). The correction is healthy and BSE has adopted the right approach to curb speculative activity, if any, in the market segments mentioned in the circular,” stated G Chokkalingam, founder and chief funding officer at Equinomics Research.
According to BSE, the ‘Add-on Price Band Framework’ shall be relevant to corporations with a market-capitalisation of lower than Rs 1,000 crore and on securities in teams X, XT, Z, ZP, ZY, and Y. The securities, BSE stated, ought to have a worth of Rs 10 and extra (as on overview date). Based on Wednesday’s market capitalisation information, these corporations accounted for lower than 1 per cent of the entire market capitalisation of BSE-listed corporations.
Among those highlighted by the trade is the ‘Z’ group, which was launched by BSE in July 1999 and contains corporations which have didn’t adjust to its itemizing necessities and/or have didn’t resolve investor complaints and/or haven’t made the required preparations with each the depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities.
Given the sharp run-up in most mid-, small-cap counters, analysts are actually cautioning in opposition to the wealthy valuation of those two segments.
“We maintain our previous precautionary view on the small-and mid-cap indices, which have made new highs on relative valuation versus the Nifty50. Small-cap index has reached 83 per cent of NIFTY price-to-book (P/B), topping the peak of 82 per cent in January 2018. Comparatively, the mid-cap index at 78 per cent is lower than 88 per cent in January 2018,” cautions Dhananjay Sinha, managing director and chief strategist at JM Financial Institutional Securities.
As an funding technique, one must be very cautious and selective within the mid-, and small-caps, suggests A Ok Prabhakar, head of analysis at IDBI Capital. “BSE’s clampdown via the Add-on Price Band Framework was a much-needed move and will go a long way in curbing speculative activity. Short-term trades should be avoided. Investors should buy on a dip from a three – five year perspective and scout for companies that are on firm fundamental footing,” he provides.