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Media Release CLARIFICATION ON PENNY STOCKS Recently, news items have been appearing in print and electronic media on the rise of penny stocks. In a section of the media the movement of BSE Small Cap Index was identified with penny stocks. It was also reported in a section of media that the Exchange is not taking action for fear of loss of listing fees and turnover. In this regard, the Exchange would like to clarify as under: There is no standard definition of penny stocks. However, it is generally understood to be of stocks, quoted below Rs.10/-. The Exchange has taken several surveillance measures and actions to contain unwarranted exuberance in penny stocks, which is discernible. Some of the measures taken by the Exchange to contain the unwarranted exuberance in stocks are given below: 1. The Exchange has shifted to trade to trade segment (T & TS Group) more than 900 scrips (the highest ever) to contain price rise and excessive speculation. 2. Circuit Filters have been reduced in as many as 1200 scrips (the highest ever to contain spurt in prices) in the month of August 2005. Further, w.e.f. 21 st September, 2005, the Exchange had reduced across T, TS & Z group the circuit filter limits to 5% the effect of which can be seen from the statistics given below:
3. The Exchange had also levied 100% VaR margins on all scrips trading in Z and Trade to Trade groups w.e.f. 8 th August, 2005. It has substantially increased the cost of dealing in these scrips. 4. The Exchange also shifts companies which are not complying with the Listing Agreement Clauses to Z group and eventually suspends on their failure to comply. Out of 1827 companies in Z group 1246 companies have been suspended. Only 581 companies are not suspended of which on an average 200 companies are traded on any given day. The daily contribution of the Z group to the total turnover on an average is less than 0.5%. 5. It may be noted further that small cap index has a total number of 495 companies of which 4 companies are in A group, 290 companies are in B1group, 42 companies are in B2 group, 63 companies are in T group and 96 companies in S group. These companies belong to SME segment of the Indian Economy. Equating movement of small cap index with the movement of penny stocks does not represent correct interpretation and correlation. 6. None of the scrips classified as ‘Z' group are included as a constituent in any of the indices of BSE. 7. It is to be noted that the annual listing fees collected from the companies in Z group is less than 1 % of the total revenue of the Exchange. Further, the contribution of Z group scrips is only 0.5% of the total turnover of the Exchange, which hardly results in transaction revenue to the Exchange. The Exchange had compulsorily delisted 885 companies till date. It is to be noted that the stocks in T group may not necessarily be penny stocks. The shift into T segment is done as a market surveillance measure to contain excessive exuberance. It is for the investors to take informed investment decisions based on publicly available information keeping in mind their risk profile. As a proactive measure to contain market manipulation a toll free number has been installed where anyone can report any information about market aberrations. We once again urge the investors to exercise due caution and to take informed investment decisions as investments in stock markets are not risk free. Further, investors are also advised not to fall prey to claims of guaranteed returns in the stock market. Issued in the interest of the public in general. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
