MUMBAI: The capital market regulator and stock exchanges are planning to tighten their grip over small-cap and penny stocks that are susceptible to manipulation. The Securities and Exchange Board of India and the bourses may introduce a new segment called T+ Group, under which margin requirements would be steep and circuit filters would be lower.
At present, stock exchanges try to prevent manipulation by transferring them to the trade-to-trade segment or T Group. In this segment, traders have to take delivery of the shares they buy, while the daily maximum tradable limit is 5% on either side.
Exchanges shift stocks to the T Group when there is speculation and unusual movement on the back of higher-than-average volumes. These requirements result in a fall in unnatural activity in such shares. The plan to introduce a new segment comes on the heels of reports of manipulation in stock prices during inclusion into or exclusion from the T Group.
The T+ Group would include shares that have been in the T Group for over three months and whose price-to-earnings (P/E) ratio is less than 250 and book value is less than 30 times, said a source familiar with the matter. "Exchanges have got complaints that there is still a lot of manipulation despite stocks being shifted to the T Group. So, they felt there is a need for a new group," said a source in the know.
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