Both BSE and NSE have categorized their listed stocks using particular criteria. The categorization is done for ease of understanding and enables traders and investors in picking stocks. Primarily the stock classification is done with the objective of looking at stocks on the basis of trading characteristics of shares on the exchange platform. Notably each group is representative of a different category of stocks that distinguish them from one another and also the people who can trade them.
Here we attempt to understand the basics of classification of stocks on the BSE:
India's oldest exchange that has close to 5000 shares listed on its platform has grouped stocks into several groups namely 'A', 'T' 'S', 'Z' and 'B'.
'A' Group shares: These are the most liquid shares among all the shares listed on the BSE with high trading volumes. Furthermore, these companies duly comply with the exchange guidelines. When a stock is categorized as 'A' group share it suggests that stock trades are carried out as per the normal rolling settlement process. As on date, 387 odd companies are placed in this 'A' group. Some of the examples of the BSE 'A' group stocks are AB Nuvo, Bajaj Finance, Asian Paints, Balrampur Chini, Bajaj Finserv, Bata India, Maruti Suzuki, MRF, Network 18,NLC India, Reliance Industries and Sanofi India among others.
'T' Group shares: The stocks classified under the 'T' group category are settled on a trade-to- trade (T2T) basis as a surveillance measure. These shares are not allowed to be traded on an intra-day basis. To avoid any incidences of speculation, shares classified under the 'T' group category are moved in and out of trade to trade settlement on a regular basis. Some of the 'T' group scrips are Pritish Nandy Communications, Mishka Exim Ltd, Gujarat Raffia etc. As of now, 368 shares are classified under the 'T' group.
'Z' Group shares: Those companies that fail to comply with the exchange's listing requirement are grouped as 'Z' shares. The group was rolled out in July 1999 and also includes companies that do not resolve investor grievances or/ and have not made the requisite arrangements with both the depositories, namely CDSL and NSDL for dematerialization of their securities. As on date, 433 companies are placed under this group.
'S' Group shares: Small and medium companies are grouped under 'S' group. Companies falling under the group have a turnover of Rs. 5 crore and tangible assets of Rs. 3 crore. Typically these shares see low volume and hence low liquidity. Share price of these 'S' group stocks often see sharp price movements. As on date, 40 companies are listed under this group
'B' Group shares: The shares classified under the 'B' group category see normal trading volumes and fall under the rolling settlement system. Typically shares that do not fall into any of the above categories are classified as 'B' group stocks on the BSE. As on date, 2,216 companies are classified under group 'B'.
So, as 'A' group shares command a higher trading volume they typically offer high liquidity and are considered safe for investing as well as trading purpose. Group 'Z' shares should be avoided as they fail to comply with even the exchange's listing requirement. On the other hand, 'T' group shares are not typically risky even though intra-day trades are not allowed in them. They in fact offer protection against sharp price fluctuations and speculation in the market. Furthermore Group 'B' share rank lower than 'A' group shares on parameters including liquidity and other such criterions.
So, an individual before trading or investing in the capital market should be well-versed with, what each of the group classification as done by the exchange for as many as 5155 stocks listed on its platform represents.