BEWARE OF AVOIDABLE STOCKS
The aim of an investor is to earn money with ease. Therefore he should identify the companies, which should be avoided. This has been discussed in an article of Capital Market magazine of Apr 06, 08. We should invest in those companies, which have been managing qualitatively along with corporate governance rules. Some companies do not follow the regulating rules, and their operation is suspect. Stock exchanges monitor regularly. Z-group stocks do not comply with the provisions. Trade to trade (T2T) stocks, have lot of volatility and doubtful pattern of trading. Z group shares are also settled on the same basis as T2T. Z-group was introduced by BSE in 1999. They made seven parameters for considering shifting to Z-category on the basis of any three of these seven parameters, e.g. submission of annual reports, quarterly publication of results etc. or even if the companies are found to be weak, based on the assessment of net worth, sales etc. The Government regularly conducts a quarterly review of the Z-companies. Shifting to Z-category can also be done, based on investigations, complaints or any suspicious trading patterns. Trading in any of the stocks can also be suspended. Investing in Z or T2T companies means loss of money. Volatility is very high. Institutions like MFs, insurance and FIIs do not give support to such stocks. Also trading activity is very poor. Best is to keep clear of such stocks. Then there are penny stocks which are trading below their face or par value. These may be cheap in some unknown companies, but should be avoided.
More abstracts about the Capital Market Magazine