Midcap, smallcap stocks rebound as BSE revises Add-on Price Band Framework

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BSE MidCap jumped 366 points from its day’s low, while the BSE SmallCap recouped 567 points on Wednesday after BSE revised circular on the applicability of Add-on Price Band Framework.

In Monday’s session the midap and smallcap stocks came under pressure after the BSE issued a circular saying that it is capping the rise in the share price of stocks exclusively listed on its platform. However, facing objection from market participants and free fall in mid and small-cap stock the exchange has modified the notification.

As per the latest notification, the Add-on Price Band Framework will be applicable to BSE Exclusive securities in groups viz. X, XT, Z, ZP, ZY, Y. While the price of the securities should be Rs 10 or more (as on review date). The market capitalization of the security should be less than Rs 1000 crores. The objective criteria for shortlisting of securities under the Add-on Price Band Framework is based on if a stock has rallied 6 times in six months, 12 times in one year, 20 times in two years, and 30 times in three years.

“BSE’s new surveillance framework with add-on price bands for specified stocks listed exclusively on the BSE is a timely initiative to curb excessive speculative activity in these stocks. It is a fact that there is froth in the mid and small-cap space. Many stocks in this segment have low liquidity and, therefore, are capable of being manipulated by a group of traders. In the present exuberant state of the market, manipulation is easy and appears to be happening. Therefore, this initiative from the BSE is appropriate from the perspective of market integrity,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Security placed in Add-on Price Band Framework shall remain in the framework for a minimum period of 30 calendar days and shall be eligible to move out if it does not qualify the provisions of the above framework thereafter. Review of the shortlisted securities under the framework i.e. inclusion/exclusion shall be carried out on monthly basis. The add-on price bands shall be in addition to the applicable daily price bands of such securities.

“In case of corporate actions of a material nature, like rights issue, bonus issue, merger, amalgamation, takeover etc. the framework shall be applicable on the new adjusted base price,” stated the circular released by BSE.

BSE further clarified that the shortlisting of securities under the aforesaid framework is purely on account of market surveillance, and it should not be construed as an adverse action against the concerned company.

Add-on Price Band Framework circular shall come in effect from August 23, 2021.

Here is the list of 31 securities to which the Add-on Price Band Framework shall be applicable with effect from August 23, 2021