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SEBIís new Bands: Lets Rock - Views on News from Equitymaster
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  • Jun 30, 2001

    SEBIís new Bands: Lets Rock

    SEBI has introduced price bands for both the BSE Sensex and Nifty Fifty. The index based market wide circuit breaker system shall apply at three stages of the index movement either way at 10%, 15% and 20%. These circuit breakers shall bring about a coordinated trading halt in all equity and equity derivative markets nationwide. Movement of either BSE Sensex or the NSE S&P CNX Nifty whichever is breached earlier shall trigger the market wide circuit breakers. These circuits come into effect from the 2nd of July 2001. SEBI has asked the exchanges to implement index based market wide circuit breaker in compulsory rolling settlement.

    Price Band 10 %
    Time Range Trading Halt
    If index hits 10% band †
    Before I p.m. 1 hour
    At or after I p.m. - before 2:30 p.m. 30 minutes
    At or after 2:30 p.m. No halt
    Price Band 15 %
    Time Range Trading Halt
    †If index hits 15% band
    Before I p.m. 2 hours
    At or after I p.m. - before 2 p.m. 1 hour
    At or after 2 p.m. Complete halt

    In case of a 20% movement of the index, trading shall be halted for the remainder of the day.

    These percentages (10%, 15% and 20%) shall be translated into absolute points of index variations on a quarterly basis and at the end of each quarter these absolute points of index variations shall be revised and be applicable for the next quarter in place of the percentage change. The absolute points shall be calculated based on closing level of index on the last day of the trading in a quarter and rounded off to the nearest 10 points in case of S&P CNX Nifty.

    The introduction of price bands on the indices was done with a view to curb unwarranted volatility, as with the creation of the derivatives market there are chances of heavy speculation on index based instruments. Both the options and the futures that trade currently are index based.

    Those in rolling

    In addition to the market wide index based circuit filters, there will be a 20% price band either way for stocks that are into compulsory rolling settlement except for scrips on which derivatives products (stock options) are available and those included in the indices on which derivatives products (index futures and options) are applicable (BSE Sensex and NSE Nifty). As delivery becomes compulsory on these scrips, the price band has been relaxed on either side, as it will require a lot more money to speculate on these scrips. These scrips attract more speculation due the relatively greater amount of information available on these scrips and of course, the holding too is large.

    List of scrips without any price bands are given in the list below.

    S.No Symbol Security
    1 ABB Asea Brown Boveri Ltd
    2 ACC Associated Cement Co Ltd
    3 ASIANPAINT Asian Paints India Ltd
    4 BAJAJAUTO Bajaj Auto Ltd
    5 BHEL Bhel
    6 BRITANNIA Britannia Industries Ltd
    7 BSES Bses Ltd
    8 CASTROL Castrol India Ltd
    9 CIPLA Cipla Ltd
    10 COCHINREFN Kochi Refineries Ltd
    11 COLGATE Colgate Palmolive (I) Ltd
    12 DABUR Dabur India Ltd
    13 DIGITALEQP Digital Equipment (I) Ltd
    14 DRREDDY Dr. Reddy's Laboratories
    15 GLAXO Glaxo India Ltd
    16 GRASIM Grasim Industries Ltd
    17 GUJAMBCEM Gujarat Ambuja Cement Ltd
    18 HCL-INSYS HCL Infosystems Ltd
    19 HDFC HDFC Ltd
    20 HDFCBANK HDFC Bank Ltd
    21 HEROHONDA Hero Honda Motors Limited
    22 HINDALC0 Hindalco Industries Ltd
    23 HINDLEVER Hindustan Lever Ltd
    24 HINDPETRO Hindustan Pertoleum Corp
    25 ICICI ICICI Ltd
    S.No Symbol Security
    26 INDHOTEL Indian Hotels Co Ltd
    27 INFOSYSTCH Infosys Technologies
    28 IPCL Indian Petrochemicals Cor
    29 ITC ITC Ltd
    30 L&T Larsen & Toubro Ltd
    31 M&M Mahindra & Mahindra Ltd
    32 MTNL Mahanagar Telephone Nigam
    33 NESTLE Nestle India Ltd
    34 NIIT NIIT Ltd
    35 NOVARTIND Novartis India Ltd.
    36 ORIENTBANK Oriental Bank Of Commerce
    37 P&G Proctor & Gamble Ltd
    38 RANBAXY Ranbaxy Labs Ltd
    39 RECKCOLMAN Reckitt Benckiser (I) Ltd
    40 RELIANCE Reliance Industries Ltd
    41 RELPETRO Reliance Petroleum Ltd
    42 SATYAMCOMP Satyam Computers
    43 SBIN State Bank Of India
    44 SMITKLBECH Smith.Beech.Cons.Health
    45 TATACHEM Tata Chemicals Ltd
    46 TATAPOWER Tata Power Co Ltd
    47 TATATEA Tata Tea Ltd
    48 TELCO Telco Ltd
    49 TISCO Tata Iron And Steel Co Ltd
    50 ZEETELE Zee Telefilms Ltd

    Sterlite optical and VSNL do not figure either in the Sensex or the Nifty but are included in the list of stocks on which there will be individual stock options. Therefore, these two stocks also should not have price bands.

    Those not in rolling

    For the securities that are not in the compulsory rolling settlement, the existing price band shall continue. The price bands in the ALBM and Limited Physical Market shall be same as applicable as in case of normal market. In case of other securities and debentures, warrants, preference shares etc the existing price band shall continue.

    The price bands for auction market:

    For securities in compulsory rolling with no price bands in the normal market there shall be no price bands in auction market. For securities in compulsory rolling with 20% price band in the normal market, the auction price band shall be 20%. For all other remaining securities the existing price band of the auction market shall continue.

    This move by the SEBI would help the markets in terms of better price discovery and efficiency. However, this comes at a cost, the volatility will be greater but the compulsory rolling settlement will help relieve this to some extent.



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    Aug 22, 2017 09:31 AM