In a move to curb the rise in the number of illiquid stocks and make them liquid, Sebi has come up with a plan christened `Call Auction Market'. Will this bring liquidity into the market or is it just an exit route for the investors?

The primary objective of the secondary market is to provide liquidity to the stocks and enable a holder to easily convert the securities into cash. But when a large number of listed stocks in a stock exchange are illiquid, the very purpose of the secondary market seems defeated. In the Indian stock exchanges, out of the 7,000 listed stocks, as many as 4,000 are thinly traded or lack liquidity. The recent figures indicate that between March 31, 1996 and March 31, 2003, the number of illiquid scrips rose by 34%. For the same period, the number of scrips traded has fallen to 2,283 from about 3,443. Some other facts worth mentioning are that 8.8% of companies listed on the BSE traded for less than 10 days during 2002-03, while 32.3% of the stocks were traded for less than 100 days. The whole period of rise in illiquid stocks over the past few years has put pressure on the Securities and Exchange Board of India (Sebi) to take measures to put liquidity back into these stocks. As a result, the regulator has decided to set up Call Auction Market by July 2004, where the investors can buy and sell these moribund stocks.

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