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Check a company’s grouping by BSE before investing: Harshad Chetanwala

Classification of companies can help investors understand where the company stands in terms of market interest and compliance but due diligence is must before making an investment decision.

May 03, 2021 / 12:08 PM IST
Representative image.

Representative image.


Harshad Chetanwala

There are more than 4,000 active companies listed on Bombay Stock Exchange (BSE). With so many companies on the offering, BSE help investors to understand these listed companies in a better manner by classifying then under different categories or groups.

This grouping of companies can be a good filter for investors. Each group represents companies with some characteristics. The groups classified by BSE are ‘A’, ‘T’, ‘Z’ and ‘B’.

Group ‘A’

The Group ‘A’ represents those companies and businesses that are most popular and actively traded on the exchange. They are the most liquid companies that are listed on the exchange.

All trading activities in these companies get settled under the normal settlement process. They have large trading volumes and can be considered for investing after studying them thoroughly. By no means one should consider that companies in this group are always good for investing.

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They are in the group because they are actively traded, this is an important aspect but it is only related to liquidity. The quality and prospect of business should also be understood before investing in these companies.

Group ‘T’

The Group ‘T’ companies are those that follow trade-to-trade settlement and are not allowed to be traded on an intraday basis. This group is also known as the trade-to-trade segment.

Investors investing in this group companies must take delivery only, ie they have to make complete payment in case they have purchased or deliver the shares if they have sold. To avoid speculation, many companies are often moved in and out of this group.

Group ‘Z’

The ‘Z’ group was introduced by BSE in July 1999 for the companies that have failed to comply with BSE guidelines. These companies may not have fulfilled the exchange’s listing requirements, failed to redress investor complaints or have not made arrangements with both depositories—CDSL and NSDL—for dematerialisation of their shares.

Very limited information is available about most of these companies in public domain and hence they are more vulnerable to insider trading. Investors looking for good and long-term investment should follow a cautious approach while investing in Group Z companies.

Group ‘B’

Group ‘B’ comprises of companies that do not fall in any other group. These companies have normal trading volumes and follow rolling settlement system. This group have the largest number of companies and are one notch lower to Group ‘A’ companies when it comes to liquidity and other criteria. Investors can consider these companies after due diligence and understanding these firms.

Classification of companies and different groups can help investors understand where the company stands in terms of market interest and compliance related activities.

However, investors should always do proper due diligence before investing in any company irrespective of the group they belong to.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Harshad Chetanwala
first published: May 3, 2021 12:08 pm

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