The rupee weakened further by 13 paise to trade at Rs59.70 against the US dollar in early trade on Friday, on unrelenting capital outflows and strong demand of the American currency from importers
Continuing its decline, the rupee weakened further by 13 paise to trade at Rs59.70 against the US dollar in early trade on Friday, on unrelenting capital outflows and strong demand of the American currency from importers.
However, the euro’s gain against the US dollar overseas, capped rupee’s loss.
The Indian unit had yesterday hit an all-time low of 59.93 intraday, before the Reserve Bank of India stepped in to help the local currency recover some ground. It had ended 87 paise down at 59.57 on huge outflows.
Hind Industries, a small-cap company, saw its market capitalisation get decimated by Rs1.72 crore over a single trade of a single share on Wednesday! This is a result of SEBI’s newly-introduced call auction system of tackling illiquid counter
On Wednesday, Rs1.72 crore of market capitalisation was wiped off, in a single trade of just one share, in Bombay Stock Exchange (BSE) listed scrip—Hind Industries, points out investor Bosco Menezes. This trade took place in the much-touted and controversial Periodic Call Auction System (PCAS) window, introduced by Securities Exchange Board of India (SEBI), where illiquid scrips are traded. This clearly means that PCAS system is extremely susceptible to manipulation—exactly what the SEBI tried to counter through PCAS!
Here is what happened yesterday.
In the BSE’s PCAS window, just one share was traded at Rs 38.10, which is apparently the lower circuit filter and the first trade since 29 May 2013. Its previous close was Rs40.10 (i.e. 29th May). This means, roughly Rs1.72 crore of market capitalisation of Hind Industries was destroyed with a single trade. In fact, this isn’t helping the liquidity situation because the total traded volume was just one share!
What is more shocking is that Hind Industries was actually a healthily traded company, with decent volumes, at least by its small-cap standards. It wasn’t until the PCAS system introduced by SEBI which termed the company ‘illiquid’.
Hind Industries saw 78,939 shares traded in January 2013, followed by 31,525 shares in Feb 2013, and thereafter a volume of 56,873 shares in March 2013. This is a cumulative of 167,337 shares, or roughly 2,700 shares traded daily, over the three month period ending March 2013 (i.e. 62 trading days), just prior to the inauguration of the PCAS system. Last year it was greater than 1,600 shares and the year prior to that it was greater than 2,250 shares. These are decent numbers of shares traded for a small-cap company.
What happened after PCAS system came into force? The company became ‘illiquid’ overnight. The average daily traded volume tanked over 95%! In May, only 2,673 shares were traded over 23 trading days (and works out to 116 shares daily). In April, it was slightly better though, with 982 shares traded daily, but still way below the 2,700 shares in the first calendar quarter.
So much for SEBI’s effort to infuse ‘liquidity’ and “curb manipulation” through a separate window. This puts many counters at the risk of price manipulation (whether by the promoter or someone else). We had written about SEBI’s flawed PCAS policy in the past. You can access them below: