Date:21/07/2005 URL: http://www.thehindubusinessline.com/2005/07/21/stories/2005072102451500.htm

Back Removal of circuit limits on HMT, ITI surprises traders

Virendra Verma

Mumbai , July 20

TRADERS may be surprised why stocks such as HMT and ITI did not attract circuit filters despite a 30 per cent rise in a single day. These are not the only stocks on which circuit filter will not be applicable, but on stocks such as Crest Animation, McDowell, Navneet Publications and many more.

This is due to the introduction of futures & options (F&O) trading in the Bombay Stock Exchange (BSE) six sectoral indexes.

"Futures and options contracts on six sectoral indices were introduced for trading in the derivatives segment from July 11. HMT & ITI are part of PSU Index, and, therefore, they do not have circuit filter limit," a BSE spokesperson said.

The indexes on which BSE started F&O trading are TECk, Bankex, oil & gas, PSU, metal and FMCG.

BSE and NSE set two per cent to 20 per cent circuit filter limits for different stocks. Under circuit filter, the stock price of a company can go up or down by the set percentage limit. However, stocks in which there are no circuit limits can go up or down to any limit.

As per the SEBI guidelines, circuit filter will not be applied on stocks included in indexes on which F&O trading is allowed either on BSE or NSE. Circuit filter will also not be applicable on individual stocks in which F&O trading is there.

While BSE informed brokers about this, NSE did not, brokers said.

An NSE official said the exchange did not issue a separate notice to its members but informs them through broadcast on trading terminal about the stocks which will not have circuit filter everyday before the market opens.

Brokers said the BSE move could have several negative implications for investors during the bull rally. "Most of the stocks are at their all-time high and any negative news could lead to sharp fall in stock prices. Since several of the stocks (in BSE sector indexes) have very low liquidity, manipulation is much more easier," said a broker.

He said there is negligible trading on the F&O segment of BSE, including the new indexes.