BSE makes small cap investors sweat 😐

BSE makes small cap investors sweat 😐

If you ain’t updated with the market crash, either you’re a true long term investor, or lost in deep slumber. Both, good for you!

What happened — Small and mid-cap stocks took massive dumps, shaking the bottom floor of the markets after the Bombay Stock Exchange, on the behest of regulators, disclosed some steps to put an end to pump and dumps, and extreme volatility.

In simple terms, the exchange will update its circuit-breaker rules, basically limits that make sure trading in a stock is halted, if those stocks make wild up or down moves (greater than 20%), particularly thinly traded stocks listed exclusively on the BSE.

BSE says in addition to regular circuit limits, it will put weekly and monthly limits as well for a set of companies, list of which will be disclosed. Here’s a link to the new “limit” schedule though.

Consequences520+ stocks tanked more than 20% yesterday, and nearly 2,500+ ended the day in the red as scared investors ran for the door. BSE small cap and mid-cap indices tanked 2-5% yesterday. Phew!

Oh Yeah Wow GIF by Regal

What does this mean for me — unless you’re an active stock picker with exposure to tiny market-cap companies, counting on daily liquidity, you won’t have to worry much.

Short term, markets could feel some jitters and pull back a notch. Long term, regulators stepping-in to restrict shenanigans should help flush the bottom of the pit of systematic manipulative actors.