To safeguard investor interest, stock exchanges BSE and NSE on Wednesday advised their members to take extra caution while trading in nearly 400 illiquid stocks.
Illiquid stocks are those that cannot be sold easily because they see limited trading. They pose higher risks to investors because it is difficult to find buyers for them as compared to frequently traded shares.
“Members are advised to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients,” bourses BSE and NSE said in similarly worded circulars to their broker members.
As per directions from market regulator Securities and Exchange Board of India (Sebi), BSE and NSE have listed 363 and 33 illiquid stocks respectively where additional due diligence is required.
As per Sebi directions, the exchanges are required to draw up a list of illiquid securities, based on a criteria jointly agreed with market regulator and make it available to the trading members on a quarterly basis.
Illiquid scrips listed by both the exchanges include Bilpower, Gujarat Lease Financing, Khaitan (India)and Zenith Computers.
In December 2013, Sebi had relaxed norms for trading in illiquid stocks. It has helped in shifting various illiquid scrips to normal trading session from the ‘periodic call auction’, the window where these stocks are currently traded.