Both the exchanges advised their trading members to exercise additional due diligence while trading in illiquid stocks either on own account or on behalf of their clients.
To safeguard interests of investors, leading stock exchanges BSE and NSE have advised their members to take extra caution while trading in nearly 480 illiquid stocks.
Illiquid stocks are those that cannot be sold easily because they see limited trading.
These stocks pose higher risks to investors because it is difficult to find buyers for them as compared to frequently traded shares.
In similar-worded circulars, both the exchanges advised their trading members "to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients".
BSE and NSE have listed out 440 and 38 illiquid stocks, respectively, where additional due diligence is required.
Illiquid scrips listed by both the exchanges include Shyam Telecom, Global Offshore Services, DCM Financial Services, Creative Eye and National Steel and Agro Industries.
Based on the trading activity from January to March, these scrips will be traded in periodic call auction mechanism from April 13, the exchanges noted.
The criteria for shifting securities in periodic call auction mechanism is decided in consultation with Securities and Exchange Board of India (Sebi) and applied uniformly across the stock exchanges and reviewed periodically.
In December 2014, the market regulator had relaxed norms for trading in illiquid stocks.
The move was aimed at shifting various illiquid scrips to normal trading session from the periodic call auction, the window where these stocks are currently traded.
Photograph: Shailesh Andrade/Reuters
