New BSE Circular - 31 Small cap stocks list – Should you exit from Midcap and small cap stocks and mutual funds now

New BSE Circular – 31 Small cap stocks list – Should you exit from Midcap and small cap stocks and mutual funds now?

New BSE Circular - 31 Small cap stocks list – Should you exit from Midcap and small cap stocks and mutual funds nowNew BSE Circular – 31 Small cap stocks list – Should you exit from Midcap and small cap stocks and mutual funds now?

If you are investing in Midcap or small stocks, you would have seen this segment has been falling in the last few days. You would have observed midcap or small cap mutual funds NAV has been falling recently. When covid-19 pandemic did not hurt stock markets, this BSE Circular released on Monday creating some panic. BSE circular is about surveillance measure which would impact Midcap and small cap stocks; hence these two segments have been falling in the last 3 days. Should you exit mid cap or small cap stocks now? If you are investing in midcap or small cap mutual funds, what should you do?

Also Read: 5 Mutual Funds that gave higher returns in last 1 year

What are Surveillance measures of BSE or NSE?

Generally, stock exchanges (NSE and BSE) would put certain stocks under surveillance measures which shows unusual activities. This is nothing to do about fundamentals. But basically, suspicious change in volume or price in short time.

There is list of surveillance measures which stock exchanges adopts like implementing circuit filters, Graded Surveillance measures (GSM), Additional Surveillance measures (ASM) etc.,

What is this new BSE circular on surveillance measure?

Currently, BSE has circuit filters (upper or lower circuits) for all stocks which would be in the range of 5% to 20%. This is one of the surveillance measures already implemented.

However, BSE new rule / circular released on Monday states that another circuit (add-on price band) would be applicable to a larger period. This limit would be based on current circuit limit categorized into weekly, monthly and quarterly.

Let me explain with an example. Company X is trading at Rs 50 per share and has 20% circuit. In current scenario, it can trade between 40-60. However, as per new BSE circular, the add-on price band would be applied which would be:

  1. i) Weekly circuit would be 1.6x (Upper) and 0.6x (Lower)
  2. ii) Monthly circuit could be 2x (Upper) and 0.5x (Lower)

iii) Quarterly circuit would be 3x (Upper) and 0.3x (Lower).

Confused? Let me continue above example of Rs X company trading at Rs 50 per share.

1) X stock weekly circuit would be 30-80 (Rs 50 x 0.6 – Rs 50 x 1.6)

2) X stock monthly circuit would be 25-100 (Rs 50 x 0.5 – Rs 50 x 2)

3) X stock quarterly circuit would be 15-150 (Rs 50 x 0.3 – Rs 50 x 3)

Means, X stock cannot trade beyond these boundaries. This would help stock manipulation by stock brokers or traders.

Add-On Price Band based in circuit limits

Ad-on price band new BSE circular 2021

List of 31 Small cap stocks identified by BSE under Surveillance Measures New Rule

Here is the list of 31 small cap stocks identified by BSE where its new rule would be applied from 3rd week of August, 2021. This list would get updated with additions/removals on periodic basis.

  1. Anjani Foods Ltd
  2. Ashiana Agro Industries Ltd
  3. Assam Entrade Ltd
  4. Available Finance Ltd
  5. AVI Polymers Ltd
  6. B&A Packaging India Ltd
  7. Cosmo Ferrites Ltd
  8. Flomic Global Logistics Ltd
  9. Garware Synthetics Ltd
  10. Gita Renewable Energy Ltd
  11. Gopala Polyplast Ltd
  12. Halder Venture Ltd
  13. Hazoor Multi Projects Ltd
  14. IEL Ltd
  15. Jaykay Enterprises Ltd
  16. LWS Knitwear Ltd
  17. Master Trust Ltd
  18. One Global Service Provider Ltd
  19. Pacheli Industrial Finance Ltd
  20. Pan Electronics India Ltd
  21. Pooja Entertainment and Films Ltd
  22. S & T Corporation Ltd
  23. Sangam Renewables Ltd
  24. Saraswati Commercial India Ltd
  25. Sarthak Industries Ltd
  26. SC Agrotech Ltd
  27. Shree Worstex Ltd
  28. Shri Bajrang Alliance Ltd
  29. Siel Financial Services Ltd
  30. Svarnim Trade Udyog Ltd
  31. Texel Industries Ltd

What happens if such mid cap or small cap stock touches the circuit limit?

If someone wants to sell, they need to sell at lower circuit if buyers are there, else they need to wait for the next circuit limit. Once this add-on price band circuit is reached, there would not be any further trades beyond this price. Means your money would be stuck as there are no buyers even if you want to sell at lower price.

If you are holding any of the above listed stocks and want to sell at market price, there should be buyers. If it hits lower circuit, there is no way you can sell them.

Should midcap or small cap stock investors or mutual fund investors need to worry about this new BSE rule?

Currently there are 31 list of BSE stocks identified to be part of the new surveillance measure.

1) If you are holding any of such stocks and want to come out, you may face liquidity issues in coming days.

2) BSE can add or remove stocks from this list based on certain guidelines. If you are investing in other mid cap or small cap stocks, especially macro stocks or penny stocks, there are chances that such stocks can come under BSE new rule surveillance measures. Hence investors need to be cautious about it.

3) If you are holding mid cap or small cap mutual funds, you might see a decline in NAV due to negative sentiment over BSE new circular. Since midcap and small cap segment is all time high now, there could be profit booking too in coming days. In such case the Midcap or small cap funds might show down trend or negative returns for the next. If you are a long term investor, you can ignore such negative sentiments. However, if you are looking for profit booking in the next few weeks or months, it might impact you. You need to take a call now.

4) This circular is specific to BSE listed stocks only. Means if such midcap or smallcap stock is listed on both BSE as well as NSE, these would not come under new BSE circular surveillance guidelines. NSE said there is no such plan to implement for the stocks listed on their stock exchange as of now. Hence if you are investing in midcap or small cap stocks which are listed on NSE and BSE, there are less chances that your portfolio might get impacted with such new circular.

Have you liked our tips and analysis? Then share it on your Facebook, Twitter, Telegram and other social media, which might be useful to your friends too.

Suresh KP

6 thoughts on “New BSE Circular – 31 Small cap stocks list – Should you exit from Midcap and small cap stocks and mutual funds now?”

  1. Thanks Mr. Suresh Jee onceagain for your efforts and timely present of awareness to the General Investors. I think no body shared these 31 companies list in any article. By these definitely like me, many of us benefiting.

    1. Thanks for your comments Ravee. This list of 31 smallcap stocks came out yesterday evening (I was holding the article for this list), hence I could include immediately before publishing the article. Awaiting midcap stocks list too from BSE. Once I hear, I can add to this article or publish fresh article on that.

  2. Dear Suresh ji,
    If new IPO is going to list on BSE only, then on listing time this BSE new circuit is applicable or what?
    Warmly
    Sanjeev

      1. To my knowledge, if the IPO is large enough to be included in BSE100 list/F&O list, then, there is no circuit limit, otherwise a 20% circuit limit is imposed even in case of IPO on the listing day but this 20% limit is based upon the opening price and not the issue price.

        1. Kamalji, the question is about whether stocks that come up for IPO included with add-on filters (beyond regular circuit). At this point of time, we do not know whether there is any grace period / relief for such IPOs if BSE suspects there is manipulation is being done post listing (after few days).

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