The Hindu Business Line : T & Z groups account for 25 pc of BSE volumes

WITH stock prices touching new highs every day, there has been a sudden increase in trading volumes in the shares of companies that have weak fundamentals and those not complying with the listing norms of stock exchanges.

A good indicator of this is seen from the rise in trading volumes in the T and Z groups of the BSE.

The exchange shifts shares of companies that fail to comply with listing norms to the Z group. Several companies do not comply with listing norms - they do not file quarterly results, they are unable to resolve investor grievances and demat request of shares. The shares of such companies are shifted to T group when the exchanges find unusual stock price movement.

Several brokers see this trend very risky for the investors and the overall stock market.

The shares of T and Z groups traded on the BSE has increased from an average of 15.6 per cent of all shares traded in June this year to around 25 per cent in September 2005. During this time, the BSE Sensex rose from 7,000 (June 20) to 8,000 points plus levels.

The stock price of several companies in these two groups have also jumped sharply between June and now. "A shift towards the largest number of shares with low value indicates deterioration of quality of shares being traded by investors," said Mr Arun Kejriwal of KRIS Research.

Some brokers said investors are not willing to buy shares of sound companies whose stock price is high in absolute terms, but they are asking for stocks that are trading between Rs 10 and Rs 20.

There are some market players who are not able to find investment ideas in good companies and float ideas in companies that have weak fundamentals. "There is lack of fresh or new ideas and investors are jumping to penny stocks bandwagon to make fast buck," Mr Kejriwal said.

Some of ideas that are floating in the market include debt restructuring, carbon credits, bio-fuels and big orders compared to the size of the company.

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