D-Street Buzz: Broader market pares losses after BSE clears confusion on new rules


Extending their underperformance against the frontline stocks, mid and smallcaps continued witnessing selloff in intraday trade on August 11.

Both the mid and smallcap indices underperformed the benchmark Sensex in intraday trade but pared their losses after BSE clarified on its new rule for certain stocks which had triggered a sharp selloff in mid and smallcap stocks.

At 1500 hours, the BSE Sensex was 0.09 percent down at 54,505 while the BSE Midcap and smallcap indices were down 0.49 percent and 1.18 percent, respectively.

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Nearly 700 stocks, all from mid and smallcap space, including Sequent Scientific, Trident, Salona Cotspin, RS Software, RSWM, Lyka Labs, Kingfa Science & Technology, Agarwal Industrial Corporation, Zee Media Corporation, Nahar Capital and Fairchem Organics, hit their lower circuits on BSE in intraday trade today.

The mid and smallcaps are witnessing panic selling after the BSE had introduced a new surveillance framework – Add-on Price Band Framework for certain stocks.

However, BSE clarified that the new rules were applicable to securities in groups X, XT, Z, ZP, ZY and Y only. Besides,  these securities should have a price of Rs 10 and more and the stock’s market capitalization should be less then Rs 1,000 crore.

For some time, mid and smallcaps may continue underperforming the largecaps, experts said.

“Nifty’s strength is largely due to the resilience of high-quality financials, particularly the HDFC twins, ICICI Bank and Kotak Bank. This divergent performance is desirable and healthy since it is removing the froth in the broader market and rewarding quality. The underperformance of the broader market may continue,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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